A comment on "The effect of a common currency on the volatility of the extensive margin of trade"

Luís Alexandre Barbosa Guimarães ()
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Luís Alexandre Barbosa Guimarães: Faculdade de Economia, Universidade do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In this paper I comment on Auray, Eyquem, and Pontineau (2012). I show that their introduction of sticky-prices into Ghironi \& Melitz (2005) framework is incorrect and generates a bias in simulation results. Additionally, I find that, by introducing sticky-prices into Ghironi \& Melitz (2005) framework in a correct way, the model is able to account for the empirical findings of Auray, Eyquem, and Pontineau (2012). Finally, I also find that if central banks target a data-consistent CPI inflation, results improve quantitatively.

Keywords: Pricing-to-market; Local currency pricing; Extensive Margin; Monetary Union; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E32 E52 F41 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2012-03
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:449

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