The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models: Comment
- (pp. 1072-89)
AbstractIn an article published in the American Economic Review, Jón Steinsson (2008) argues that two sticky price models driven by real shocks can explain the observed persistence, volatility and hump-shaped impulse response function of the real exchange rate. This comment shows, first, that correcting an error in one of Steinsson's models leads to substantially lower persistence and volatility of the real exchange rate; second, that Steinsson's models cannot match real exchange rate volatility relative to output; and, third, that reasonable variations of the model calibration or specification all lead to lower real exchange rate persistence and volatility (or both).
CitationIversen, Jens, and Ulf Söderström. 2014. "The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models: Comment." American Economic Review, 104 (3): 1072-89. DOI: 10.1257/aer.104.3.1072
- E52 Monetary Policy
- F41 Open Economy Macroeconomics
- F44 International Business Cycles