RDP 2007-10: Trade Costs and Some Puzzles in International Macroeconomics
Equation (2)
log
(
R
E
R
i
t
)
=
δ
2
+
ϕ
2
log
(
R
E
R
i
t
−
1
)
+
γ
2
log
(
R
E
R
i
t
−
1
)
f
i
t
+
θ
2
f
i
t
+
e
2
i
t
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