Mario J Crucini2
Serena Ng2
2Mario J Crucini
2Serena Ng
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This paper extends the diffusion index (DI) forecast approach of Stock and Watson (1998, 2002) to the case of possibly nonlinear dynamic factor models. When the number of series is large, a two-step procedure based on the method of principal components is useful since it allows the wide variety of the nonlinearity in the factors. The factors extracted from(More)
We study the dynamics of good-by-good real exchange rates using a micro-panel of 270 goods prices across 90 international cities and 13 cities within the U.S., annually from 1990 to 2000. The picture of relative price adjustment that emerges from our analysis is that price adjustment is very rapid both across cities within countries and across cities of the(More)
We examine whether the news shocks, as explored in Beaudry and Portier (2004), can be a major source of aggregate fluctuations. For this purpose, we extend a dynamic stochastic general equilibrium model, à la Christiano, Eichenbaum, and Evans (2005), by allowing news shocks on the total factor productivity and estimate the model using Bayesian methods.(More)
JEL classification: E31 F31 D40 Keywords: Real exchange rates Law of one price Sticky prices Nonparametric test for monotonicity a b s t r a c t We introduce the real exchange rate volatility curve as a useful device to understand the relationship between price stickiness and the fluctuations in Law of One Price deviations. In the presence of both nominal(More)
It has been claimed that the deviations from purchasing power parity are highly persistent and have quite long half-lives under the assumption of a linear adjustment of real exchange rates. However, inspired by trade cost models, nonlinear adjustment has been widely employed in recent empirical studies. This paper proposes a simple nonparametric procedure(More)
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