International Prices and Exchange Rates

Международные цены и обменные курсы
Ariel Burstein, Gita Gopinath
2013-02-01

exchange ratesgeneral equilibriuminternational pricesnominal rigiditiesvariable markups
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.
1
A simple framework is presented to interpret the empirical evidence on price–exchange-rate relationships.
2
It updates major empirical findings concerning how prices respond to exchange-rate changes.
3
The paper surveys recent empirical and theoretical research on the relationship between international prices and exchange rates.
4
The review examines models in which variable markups make prices insensitive to exchange-rate changes under both flexible prices and nominal rigidities.
5
These pricing mechanisms are analyzed in both partial-equilibrium and general-equilibrium settings.

The relationship between international prices and exchange rates

Empirical patterns and theoretical mechanisms underlying the insensitivity of prices to exchange-rate changes, including variable markups under flexible prices and nominal rigidities

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2013-02-01
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Ariel Burstein
Gita Gopinath
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