Template-Type: ReDIF-Paper 1.0
Author-Name: E Pavlidis
Author-Name-First: E
Author-Name-Last: Pavlidis
Author-Name: I Paya
Author-Name-First: I
Author-Name-Last: Paya
Author-Name: D Peel
Author-Name-First: D
Author-Name-Last: Peel
Title: Real Exchange Rates and Time-Varying Trade Costs
Abstract: Previous empirical work on the Purchasing Power Parity does not explicitly account for
time-varying trade costs. Motivated by the recent gravity literature we incorporate a microfounded
measure of trade costs into two nonlinear regression models for the real exchange
rate. Using data for the dollar-sterling real exchange rate from 1830 to 2005, we provide
significant evidence in favor of a positive relation between the level of trade costs and the
degree of persistence of the real exchange rate.
Creation-Date: 2009
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/TradeCosts.pdf
File-Format: application/pdf
Number: 600537
Classification-JEL: 
Keywords: Real Exchange Rates, Time-Varying Trade Costs, Smooth TransitionNonlinearity, Persistence, Simulation Methods
Handle: RePEc:lan:wpaper:600537