Financial Liberalization, Structural Change, and Real Exchange Rate Appreciations
AbstractWe account for the appreciation of the real exchange rate in Mexico between 1988 and 2002 using a two sector dynamic general equilibrium model of a small open economy with two driving forces: (i) differential productivity growth across sectors and (ii) a decline in the cost of borrowing in foreign markets. These two mechanisms account for 60 percent of the decline in the relative price of tradable goods and explain a large fraction of the reallocation of labor across sectors. We do not find a significant role for migration remittances, foreign reserves accumulation, government spending, terms of trade, or import tariffs.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/63.
Date of creation: 01 Mar 2010
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Other versions of this item:
- Meza, Felipe & Urrutia, Carlos, 2011. "Financial liberalization, structural change, and real exchange rate appreciations," Journal of International Economics, Elsevier, Elsevier, vol. 85(2), pages 317-328.
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-IFN-2010-03-28 (International Finance)
- NEP-OPM-2010-03-28 (Open Economy Macroeconomics)
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- Sangeeta Pratap & Carlos Urrutia, 2011.
"Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises,"
Working Papers, Centro de Investigacion Economica, ITAM
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- Sangeeta Pratap & Carlos Urrutia, 2012. "Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 336-358, July.
- Sangeeta Pratap & Carlos Urrutia, 2010. "Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises," Economics Working Paper Archive at Hunter College, Hunter College Department of Economics 429, Hunter College Department of Economics.
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- Beker, Victor A., 2012. "A case study on trade liberalization: Argentina in the 1990s," Economics Discussion Papers 2012-3, Kiel Institute for the World Economy.
- Guyot, Alexis & Lagoarde-Segot, Thomas & Neaime, Simon, 2014. "Foreign shocks and international cost of equity destabilization. Evidence from the MENA region," Emerging Markets Review, Elsevier, Elsevier, vol. 18(C), pages 101-122.
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