Andres Blanco, Javier Cravino, 17 August 2018

Economists have often interpreted the observation that movements in real exchange rates are large, persistent, and closely track movements in nominal rates while cross-country differences in inflation rates are small and stable as direct evidence for nominal price rigidities. This column uses the microdata behind the construction of the consumer price index to isolate the real exchange rate for the subset of goods that change prices. This ‘reset exchange rate’ moves with the real exchange rate, suggesting that sticky prices are not a primary factor in dampening the response of inflation to exchange rate shocks.

Woo Jin Choi, Alan Taylor, 22 May 2017

Widening global imbalances, driven by reserve accumulation, can help us investigate how real exchange rates are determined. Standard theory would predict real exchange rate appreciation when there is an increase in net foreign assets. This column uses recent data from 75 countries to argue that, in practice, there is the opposite correlation in the particular case of reserve accumulation, notably in countries with higher capital controls and in developing countries.

Beatrice Weder di Mauro, Christoph Moser, Dieter Urban, 17 March 2008

A number of studies of the United States have shown that movements in the real exchange rates impact net and gross job flows in manufacturing and that this effect increases with openness. The authors of CEPR DP6745 investigate the impact of international competitiveness on net employment, job creation, job destruction and gross job flows for a representative sample of German establishments from 1993 to 2005.


CEPR Policy Research