Despite the fact that the presence of non tradable goods is one of the most frequently advanced reasons for the failure of PPP, the empirical analysis conducted in this paper shows that it explains only a very small portion of the long run behaviour of real exchange rates (RERs) in developed countries: in most cases, there appears to be a very strong long run relationship between RERs calculated on price indexes for tradables and non tradables. As a consequence, deviations from PPP usually appear to be as large for both kinds of goods. To a certain extent, this stylised fact is also verified in the case of the yen/dollar RER, yet formerly known as a typical illustration of the so-called Balassa-Samuelson effect. In this context, so-called macroeconomic approaches of ERERs may be viewed as an alternative to all versions of PPP. We develop a model which combines the contributions of the most fruitful dynamic approaches, namely the NATREX and the BEER. An estimate of this model shows that the main long run determinants of the dollar/euro RER are the rate of consumption and the level of technical progress of the euro area relative to the US. Copyright Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia 2002.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 41 (2002) Issue (Month): 4 (December) Pages: 382-403 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)