The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models: Comment

Jens Iversen and Ulf S?derstr?m

American Economic Review, 2014, vol. 104, issue 3, 1072-89

Abstract: In an article published in the American Economic Review, J?n 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).

JEL-codes: E52 F41 F44 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.3.1072
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Citations: View citations in EconPapers (9)

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