and (ii) the first arrival of the news of a future shock must lead the realization of the shock by more than a minimum of time.
Although presents a new adjustment pattern, the assumption of instantaneous price adjustment is not justified in view of the recent empirical evidence. The empirical studies of , support the fact that domestic prices adjust sluggishly. These findings give us an inspiration to check if the conclusions of Aoki remain robust enough to sustain changes in alternative price adjustment patterns. This paper thus incorporates both mechanisms of price adjustment into the Aoki (1985) model. Such a modelling allows our framework to have either one or two unstable eigenvalues. Two major findings emerge from this framework. First, we find that the key factor for exchange rate misadjustment is the kind of anticipated shocks regardless of alternative price adjustment patterns. Specifically, only supply shock will generate the misadjustment. Second, we show that even if the economy embodies a sluggish price adjustment, the misadjustment of exchange rate in response to an anticipated shock can be observed during the time horizon from the first arrival of the news to the realization of exogenous shock.