A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate

Crucini, Mario J.; Shintani, Mototsugu; Tsuruga, Takayuki

A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate

Crucini, Mario J.; Shintani, Mototsugu; Tsuruga, Takayuki

Institute of Social and Economic Research Discussion Papers, 2021, 1121, 1-52

アクセス数:632件（2025-09-03 13:34 集計）

固定URL: https://hdl.handle.net/11094/79411

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タイトル	A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate
著者	著者名 Crucini, Mario J.
	NRID 1000000252718 1000000252718 著者名 Shintani, Mototsugu
	NRID 1000040511720 1000040511720 ORCID 0000-0002-8177-2330 0000-0002-8177-2330 researchmap permalink 7000008934 7000008934 Scopus Author ID 16424964300 16424964300 著者名 Tsuruga, Takayuki
キーワード等	Real exchange rates
	Law of one price
	Rational inattention
	Trade cost
抄録	At the aggregate level, the evidence that deviations from purchasing power parity (PPP) are too persistent to be explained solely by nominal rigidities has long been a puzzle (Rogoff, 1996). Another puzzle from the micro price evidence of the law of one price (LOP), which is the basic building block of PPP, is that LOP deviations are less persistent than PPP deviations. To reconcile the empirical evidence, we adapt the model of behavioral inattention in Gabaix (2014, 2020) to a simple two-country sticky-price model. We propose a simple test of behavioral inattention and find strong evidence in its favor using micro price data from US and Canadian cities. Calibrating behavioral inattention with our estimates, we show that our model reconciles the two puzzles relating to the PPP and LOP. First, the PPP deviations are more than twice as persistent as PPP deviations explained only by sticky prices. Second, the LOP deviations decrease to less than two-thirds of the PPP deviations in the degree of persistence.
出版者	The Institute of Social and Economic Research, Osaka University
収録物名	Institute of Social and Economic Research Discussion Papers
巻(号)	1121
ページ	1-52
刊行年月	2021-03
言語	英語
ハンドルURL	https://hdl.handle.net/11094/79411
PISSN	0473453X
eISSN	24350982
関連情報 (references)	URI https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2021/DP1121.pdf
アクセス権	metadata only access
カテゴリ	ディスカッション／ワーキング・ペーパー DP/WP
カテゴリ	Institute of Social and Economic Research Discussion Papers

資源タイプ	テクニカルレポート
ローカル資源タイプ	ディスカッション／ワーキング・ペーパー
DCMI資源タイプ	text
DCTERMS.bibliographicCitation	Institute of Social and Economic Research Discussion Papers. 2021, 1121, p. 1-52
DC.title	A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate
DC.creator	Crucini, Mario J.
	Shintani, Mototsugu
	Tsuruga, Takayuki
DC.publisher	The Institute of Social and Economic Research, Osaka University
DC.language' scheme='DCTERMS.RFC1766	英語
DC.type' scheme='DCTERMS.DCMIType	text
DCTERMS.issued' scheme='DCTERMS.W3CDTF	2021-03
DC.relation' scheme='DCTERMS.URI	https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2021/DP1121.pdf
DC.subject	Real exchange rates
	Law of one price
	Rational inattention
	Trade cost
DCTERMS.abstract	At the aggregate level, the evidence that deviations from purchasing power parity (PPP) are too persistent to be explained solely by nominal rigidities has long been a puzzle (Rogoff, 1996). Another puzzle from the micro price evidence of the law of one price (LOP), which is the basic building block of PPP, is that LOP deviations are less persistent than PPP deviations. To reconcile the empirical evidence, we adapt the model of behavioral inattention in Gabaix (2014, 2020) to a simple two-country sticky-price model. We propose a simple test of behavioral inattention and find strong evidence in its favor using micro price data from US and Canadian cities. Calibrating behavioral inattention with our estimates, we show that our model reconciles the two puzzles relating to the PPP and LOP. First, the PPP deviations are more than twice as persistent as PPP deviations explained only by sticky prices. Second, the LOP deviations decrease to less than two-thirds of the PPP deviations in the degree of persistence.
DC.format	79411
citation_title	A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate
citation_author	Crucini, Mario J.
	Shintani, Mototsugu
	Tsuruga, Takayuki
citation_publisher	The Institute of Social and Economic Research, Osaka University
citation_language	英語
citation_date	2021-03
citation_journal_title	Institute of Social and Economic Research Discussion Papers
citation_volume	1121
citation_firstpage	1
citation_lastpage	52
citation_public_url	https://hdl.handle.net/11094/79411
citation_abstract_html_url	https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2021/DP1121.pdf

A Behavioral Explanation for the Puzzling Persistence of the Aggregate Real Exchange Rate

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