We survey the recent empirical and theoretical developments in the literature on the relation between prices and exchange rates. After updating some of the major findings in the empirical literature we present a simple framework to interpret this evidence. We review theoretical models that generate insensitivity of prices to exchange rate changes through variable markups, both under flexible pr...

We survey the recent empirical and theoretical developments in the literature on the relation between prices and exchange rates. After updating some of the major findings in the empirical literature we present a simple framework to interpret this evidence. We review theoretical models that generate insensitivity of prices to exchange rate changes through variable markups, both under flexible pr...

The most prominent characteristic of the Japanese yen/U.S. dollar nominal exchange rate in the post-Plaza Accord era is near random-walk behavior sharing a common stochastic trend with the two-country monetary base differential augmented with excess reserves. In this paper, we develop a simple two-country incomplete-market model equipped with domestic reserve markets to structurally investigate...

One important issue of exchange rate pass-through is the extent to which exchange rate changes affect the prices. This paper studied the pass-through effect of movements in the RMB nominal exchange rate on consumer prices. In particular, we examined whether the exchange rate pass-through to consumer prices was complete or not, and the impact of exchange rate system reform had on the pass-throug...

Abstract Can currency competition affect central banks’ control of interest rates and prices? Yes, it can. In a two-currency world with competing cash (material or digital), the growth rate cryptocurrency sets an upper bound on nominal attainable inflation rate, if government is to retain its role as medium exchange. any case, has full rate. With interest-bearing digital currency, equilibria in...

This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-theart methodologies, we …nd little systematic relation between oil prices and the exchange rate at the monthly and quarterly frequencies. In contrast, the main contribution is to show the existence of a very short-term relationshi...

Executive Summary This paper analyzes exchange rate regimes implemented by the major Latin American countries since the Second World War, with special attention to the period of the second globalization process beginning in the 1970s. A central argument is that exchange rate policy has played a significant role in shaping many of the macroeconomic outcomes observed during these decades. The cho...