Mazzenga, ElisabettaRavn, Morten O.Universitat Pompeu Fabra. Departament d'Economia i Empresa2020-05-252020-05-251998-05-01Journal of International Money and Finance, 23(4), 645-71, 2004http://hdl.handle.net/10230/457We study relative price behavior in an international business cycle model with specialization in production, in which a goods market friction is introduced through transport costs. The transport technology allows for flexible transport costs. We analyze whether this extension can account for the striking differences between theory and data as far as the moments of terms of trade and real exchange rates are concerned. We find that transport costs increase both the volatility of the terms of trade and the volatility of the real exchange rate. However, unless the transport technology is specified by a Leontief technology, transport costs do not resolve the quantitative discrepancies between theory and data. A surprising result is that transport costs may actually lower the persistence of the real exchange rate, a finding that is in contrast to much of the emphasis of the empirical literature.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commonsinfo:eu-repo/semantics/workingPaperinternational business cyclesterms of tradereal exchange ratestransport costsMacroeconomics and International Economicsinfo:eu-repo/semantics/openAccess