Systematic Movements in Real Exchange Rates in the G-5: Evidence on theIntegration of Internal and External Markets
AbstractMany recent studies have documented the random behavior of real exchange rates. This paper shows that real exchange rates defined for different sectors of an economy move closely together with one another even though each of the sectoral real exchange rates taken alone has a large random component. The sectoral real exchange rates are tied together by internal price links due to factor mobility within each national economy. Any differences between real exchange rates which develop, moreover, can be explained almost entirely by productivity differentials, at least in the long run. This paper contrasts the strong ties which bind together prices from different sectors internally with ties that bind the prices of goods from the same sector internationally. Prices are shown to be much more highly correlated internally than externally because flexible exchange rates disrupt normal pricing relationships between goods from different countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3332.
Date of creation: Apr 1990
Date of revision:
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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.:
- Adler, Michael & Lehmann, Bruce, 1983. " Deviations from Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 38(5), pages 1471-87, December.
- Jeffrey A. Frankel, 1985.
"International capital mobility and crowding-out in the U.S. economy: imperfect integration of financial markets or of goods markets?,"
Federal Reserve Bank of St. Louis, pages 33-74.
- Jeffrey A. Frankel, 1986. "International Capital Mobility and Crowding Out in the U.S. Economy: Imperfect Integration of Financial Markets or of Goods Markets?," NBER Working Papers 1773, National Bureau of Economic Research, Inc.
- Hsieh, David A., 1982. "The determination of the real exchange rate : The productivity approach," Journal of International Economics, Elsevier, vol. 12(3-4), pages 355-362, May.
- Richard C. Marston & Stephen J. Turnovsky, 1985.
"Imported Materials Prices, Wage Policy, and Macro-economic Stabilization,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 18(2), pages 273-84, May.
- Richard C. Marston & Stephen J. Turnovsky, 1985. "Imported Materials Prices, Wage Policy, and Macroeconomic Stabilization," NBER Working Papers 1254, National Bureau of Economic Research, Inc.
- Abuaf, Niso & Jorion, Philippe, 1990. " Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 45(1), pages 157-74, March.
- Rafael Puyana, 2010. "El efecto Balassa-Samuelson en Colombia," BORRADORES DE ECONOMIA 007801, BANCO DE LA REPÚBLICA.
- Rafael Puyana Martínez-Villalba, 2011. "El efecto Balassa-Samuelson en Colombia," DOCUMENTOS CEDE 007959, UNIVERSIDAD DE LOS ANDES-CEDE.
- Rafael Puyana Martínez-Villaba, . "El efecto Balassa-Samuelson en Colombia," Borradores de Economia 630, Banco de la Republica de Colombia.
- Stephen G Hall & Qian Guo, 2008.
"A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data,"
Discussion Papers in Economics
08/8, Department of Economics, University of Leicester.
- 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.
- repec:onb:oenbwp:y::i:28:b:1 is not listed on IDEAS
- Philip Lowe, 1992. "The Impact of Real and Nominal Shocks on Australian Real Exchange Rates," RBA Research Discussion Papers rdp9201, Reserve Bank of Australia.
- Bergin, Paul R & Glick, Reuven & Taylor, Alan M, 2004.
"Productivity, Tradability and the Long-Run Price Puzzle,"
CEPR Discussion Papers
4494, C.E.P.R. Discussion Papers.
- Bergin, Paul R. & Glick, Reuven & Taylor, Alan M., 2006. "Productivity, tradability, and the long-run price puzzle," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2041-2066, November.
- Paul Bergin & Reuven Glick & Alan M. Taylor, 2004. "Productivity, tradability, and the long-run price puzzle," Working Paper Series 2004-08, Federal Reserve Bank of San Francisco.
- Alan M. Taylor & Paul Bergin & Reuven Glick, 2005. "Productivity, Tradability, and the Long-Run Price Puzzle," Working Papers 511, University of California, Davis, Department of Economics.
- 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.
- Yin-wong Cheung & Menzie D. Chinn & Eiji Fujii, 2006. "The Illusion of Precision and the Role of the Renminbi in Regional Integration," Working Papers 182006, Hong Kong Institute for Monetary Research.
- Couharde, Cécile & Sallenave, Audrey, 2013. "How do currency misalignments’ threshold affect economic growth?," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 106-120.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.