Do Long Run Productivity Differentials Explain Long Run Real Exchange Rates
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Author | : Mr.Enrique G. Mendoza |
Publisher | : International Monetary Fund |
Total Pages | : 46 |
Release | : 1994-05-01 |
Genre | : Business & Economics |
ISBN | : 145184798X |
Download Do Long-Run Productivity Differentials Explain Long-Run Real Exchange Rates? Book in PDF, Epub and Kindle
We develop a two-country, balanced-growth intertemporal general equilibrium model to examine two predictions of the Balassa-Samuelson model, namely that (i) productivity differentials determine the domestic relative price of nontradables and (ii) deviations from purchasing power parity reflect differences in the relative price of nontradables. In our model, the equilibrium relative price of nontradables along the long-run balanced-growth path is determined by the ratio of the marginal products of labor in the tradable and nontradable sectors. The empirical relevance of the Balassa-Samuelson predictions is examined using the Hodrick-Prescott filter to extract long-run components from a panel database for fourteen OECD countries. The evidence indicates that labor productivity differentials do explain long-run, cross-country differences in relative prices. The predicted relative prices, however, are of little help in explaining long-run deviations from purchasing power parity.
Author | : Patrick K. Asea |
Publisher | : |
Total Pages | : 46 |
Release | : 2006 |
Genre | : |
ISBN | : |
Download Do Long-Run Productivity Differentials Explain Long-Run Real Exchange Rates? Book in PDF, Epub and Kindle
We develop a two-country, balanced-growth intertemporal general equilibrium model to examine two predictions of the Balassa-Samuelson model, namely that (i) productivity differentials determine the domestic relative price of nontradables and (ii) deviations from purchasing power parity reflect differences in the relative price of nontradables. In our model, the equilibrium relative price of nontradables along the long-run balanced-growth path is determined by the ratio of the marginal products of labor in the tradable and nontradable sectors. The empirical relevance of the Balassa-Samuelson predictions is examined using the Hodrick-Prescott filter to extract long-run components from a panel database for fourteen OECD countries. The evidence indicates that labor productivity differentials do explain long-run, cross-country differences in relative prices. The predicted relative prices, however, are of little help in explaining long-run deviations from purchasing power parity.
Author | : Patrick K. Asea |
Publisher | : |
Total Pages | : 39 |
Release | : 1994 |
Genre | : |
ISBN | : |
Download DO LONG-RUN PRODUCTIVITY DIFFERENTIALS EXPLAIN LON-RUN REAL EXCHANGE RATES? Book in PDF, Epub and Kindle
Author | : R.W. Jones |
Publisher | : North Holland |
Total Pages | : 654 |
Release | : 1984 |
Genre | : Business & Economics |
ISBN | : |
Download Handbook of International Economics Book in PDF, Epub and Kindle
Textbook, research papers on international economic theory, economic policy and practice - includes a literature survey of theoretical studies in trade relations; covers evolution of economic models explaining the determinants of trade structure, capital flow, labour mobility, trade in natural resources, etc.; examines macroeconomics aspects of balance of payments, exchange rate, international monetary system, economic relations and dependence, etc. Bibliography, graphs, statistical tables.
Author | : Man-Keung Tang |
Publisher | : International Monetary Fund |
Total Pages | : 41 |
Release | : 2003-07-01 |
Genre | : Business & Economics |
ISBN | : 145185725X |
Download Does Productivity Growth Lead to Appreciation of the Real Exchange Rate? Book in PDF, Epub and Kindle
We revisit the time-honored link between productivity and the real exchange rate. Consistent with the traditional view, we find that higher labor productivity tends to lead to appreciation of the real exchange rate. Contrary to the traditional view, however, we find that the positive productivity effect is transmitted through the real exchange rate based on tradable prices, rather than through relative prices between tradables and nontradables. Moreover, higher total factor productivity is found, if anything, to lead to depreciation of the real exchange rate. These last two pieces of evidence provide support for the emerging view that limited tradability of goods and services provides scope for the strategic pricing decision, which has material consequences for the aggregate real exchange rate.
Author | : Ronald MacDonald |
Publisher | : International Monetary Fund |
Total Pages | : 60 |
Release | : 1997-02 |
Genre | : Business & Economics |
ISBN | : |
Download What Determines Real Exchange Rates? The Long and Short of it Book in PDF, Epub and Kindle
This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.
Author | : Guglielmo Maria Caporale |
Publisher | : |
Total Pages | : 31 |
Release | : 1998 |
Genre | : |
ISBN | : |
Download Revisiting the Long-run Relationship Between Real Exchange Rates and Real Interest Differentials Book in PDF, Epub and Kindle
Author | : Mr.Gian Milesi-Ferretti |
Publisher | : International Monetary Fund |
Total Pages | : 38 |
Release | : 1994-02-01 |
Genre | : Business & Economics |
ISBN | : 1451922515 |
Download Real Exchange Rates and the Prices of Nontradable Goods Book in PDF, Epub and Kindle
This paper attempts to provide a perspective on real exchange rate developments following the inception of the EMS. The focus is on structural determinants of real exchange rates, notably the behavior of tradables and nontradable prices and productivity. It is found that changes in the relative price of tradable goods in terms of nontradables account for a sizable fraction of real exchange rate dynamics during the EMS period. Sectoral productivity growth differential help explain the behavior of the relative price of tradable goods, especially in the long run. There is also some evidence that the EMS has extended on relative price behavior.
Author | : Matthew B. Canzoneri |
Publisher | : |
Total Pages | : 56 |
Release | : 1996 |
Genre | : Foreign exchange |
ISBN | : |
Download Relative Labour Productivity and the Real Exchange Rate in the Long Run Book in PDF, Epub and Kindle
The Balassa-Samuelson model, which explains real exchange rate movements in terms of sectoral productivities, rests on two components. First, for a class of technologies including Cobb-Douglas, the model implies that the relative price of nontraded goods in each country should reflect the relative productivity of labor in the traded and nontraded goods sectors. Second, the model assumes that purchasing power parity holds for traded goods in the long-run. We test each of these implications using data from a panel of OECD countries. Our results suggest that the first of these two fits the data quite well. In the long run, relative prices generally reflect relative labor productivities. The evidence on purchasing power parity in traded goods is considerably less favorable. When we look at US dollar exchange rates, PPP does not appear to hold for traded goods, even in the long run. On the other hand, when we look at DM exchange rates purchasing power parity appears to be a somewhat better characterization of traded goods prices.
Author | : Jerome L. Stein |
Publisher | : Oxford University Press |
Total Pages | : 276 |
Release | : 1997 |
Genre | : Business & Economics |
ISBN | : 9780198293064 |
Download Fundamental Determinants of Exchange Rates Book in PDF, Epub and Kindle
"This book greatly enhances our understanding of the behavior of real exchange rates. It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of stock and flow considerations. The authors provide a masterful account of how changes in productivity and thrift affect the real exchange rate, and show that the long-run impact depends crucially on whether the change reflects the former fundamental (investment) or the latter (consumption). The empirical implementation uses state-of-the-art cointegration and error correction methodologies that are eminently well suited to capture the short-run adjustment of the real exchange rate to its medium- to long-run equilibrium value. The empirical results are extremely encouraging, as the economic fundamentals identified by the authors can explain a substantial part of the movement in the real exchange rate of a number of countries."--Peter Clark, International Monetary Fund