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Real Exchange Rates and Time-Varying Trade Costs

Pavlidis, E and Paya, I and Peel, D (2009) Real Exchange Rates and Time-Varying Trade Costs. Working Paper. The Department of Economics, Lancaster University.

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    Previous empirical work on the Purchasing Power Parity does not explicitly account for time-varying trade costs. Motivated by the recent gravity literature we incorporate a microfounded measure of trade costs into two nonlinear regression models for the real exchange rate. Using data for the dollar-sterling real exchange rate from 1830 to 2005, we provide significant evidence in favor of a positive relation between the level of trade costs and the degree of persistence of the real exchange rate.

    Item Type: Monograph (Working Paper)
    Uncontrolled Keywords: Real Exchange Rates ; Time-Varying Trade Costs ; Smooth Transition Nonlinearity ; Persistence ; Simulation Methods
    Departments: Lancaster University Management School > Economics
    ID Code: 48963
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 22:25
    Refereed?: No
    Published?: Published
    Last Modified: 27 Jul 2012 01:19
    Identification Number:

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