International Prices and Exchange Rates
67 Pages Posted: 22 Feb 2013 Last revised: 13 Jun 2022
Date Written: February 2013
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 prices and nominal rigidities, first in partial equilibrium and then in general equilibrium.
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