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Real Exchange Rates and the Prices of Nontradable Goods

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  • S. Micossi
  • Gian-Maria Milesi-Ferretti

Abstract

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/19.

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Length: 38
Date of creation: 01 Feb 1994
Date of revision:
Handle: RePEc:imf:imfwpa:94/19

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Cited by:
  1. Strauss, Jack, 1999. "Productivity differentials, the relative price of non-tradables and real exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(3), pages 383-409.
  2. Paul Bergin & Reuven Glick & Alan M. Taylor, 2004. "Productivity, Tradability, and the Long-Run Price Puzzle," NBER Working Papers 10569, National Bureau of Economic Research, Inc.
  3. Matthew Canzoneri & Robert Cumby & Behzad Diba & Gwen Eudey, 1998. "Trends in European Productivity: Implications for Real Exchange Rates, Real Interest Rates and Inflation Differentials," Working Papers 27, Oesterreichische Nationalbank (Austrian Central Bank).
  4. Weshah Razzak, 2007. "Explaining the gaps in labour productivity in some developed countries," Money Macro and Finance (MMF) Research Group Conference 2006 30, Money Macro and Finance Research Group.
  5. Peter Backé & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2002. "Price Dynamics in Central and Eastern European EU Accession," Working Papers 61, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Alberola, Enrique & Tyrväinen, Timo, 1998. "Is There Scope for Inflation Differentials in EMU? An Empirical Evaluation of the Balassa-Samuelson Model in EMU Countries," Research Discussion Papers 15/1998, Bank of Finland.
  7. Alessio Emanuele BIONDO, 2010. "The Law of One Price: Survey of a Failure," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(2), pages 168 - 182, December.
  8. Kovács, Mihály András, 1999. "Reálárfolyam-mutatók és a magyar gazdaság ár- és költség-versenyképessége
    [Indicators of real exchange rates and the price and cost efficiency of the Hungarian economy]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 145-175.
  9. Carmen Mar? Mart?ez, 2003. "Current Account Imbalances, Thriftiness And The Real Exchange Rate In A Growing Economy," UFAE and IAE Working Papers 589.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  10. Guo, Qian & Hall, Stephen G., 2010. "A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 57-78, July.
  11. International Monetary Fund, 2002. "Tunisia's Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime," IMF Working Papers 02/190, International Monetary Fund.
  12. Menzie Chinn & Louis Johnston, 1996. "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," NBER Working Papers 5709, National Bureau of Economic Research, Inc.

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