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What Determines Real Exchange Rates? The Nordic Countries

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Author Info
Bergvall, Anders () (Department of Economics)
Abstract

This paper presents a model yielding testable implications concerning the long-run co-movements of real exchange rates, relative productivity, the trade balance and terms of trade. Countries with higher productivity, trade deficits or improved terms of trade are found to have more appreciated real exchange rates, with the main channel of transmission working through the relative price of nontraded goods. Exogenous terms of trade shocks are found to be the most important determinant of long run movements in the real exchange rate for Denmark and Norway, while demand shocks account for most of the long run variance in the real exchange rate for Finland and Sweden.

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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2002:15.

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Length: 33 pages
Date of creation: 18 Aug 2002
Date of revision:
Publication status: Published in Scandinavian Journal of Economics, 2004, pages 315-337.
Handle: RePEc:hhs:uunewp:2002_015

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research
Keywords: Real exchange rates; cointegration; variance decomposition;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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References listed on IDEAS
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