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Pricing-To-Market and International Business Cycle

Author

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  • Sopraseuth, T.

Abstract

Empirical evidence suggest that nominal shocks play a major role in explaining real exchange rate fluctuations. I thus develop a two-country monopolistic competition model with nominal impulses, adjustement costs and price discrimination. I gauge the ability of the model to solve the quantity puzzle and the price puzzle. Indeed, nominal rigidities, monetary impulses and market segmentation are key ingredients for solving the price anomaly and the quantity anomaly. However, I find that, in that kind of model, there is a trade off between replicating the cross country correlations of output and consumption and accounting for the variability of the real exchange rate.

Suggested Citation

  • Sopraseuth, T., 1999. "Pricing-To-Market and International Business Cycle," Papiers d'Economie Mathématique et Applications 1999.54, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:fth:pariem:1999.54
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    Cited by:

    1. Lise Patureau, 2002. "Pricing-to-market and limited participation : a joint explanation to the exchange rate disconnect puzzle," Computing in Economics and Finance 2002 299, Society for Computational Economics.

    More about this item

    Keywords

    PRICING ; BUSINESS CYCLES;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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