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Real Exchange Rate and Productivity in an OLG Model

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  • Thi Hong Thinh Doan
  • Karine Gente

Abstract

This article develops an overlapping generations model to show how demography and savings affect the relationship between real exchange rate (RER) and productivity. In high-saving (low-saving) countries and/or low-population-growth-rate countries, a rise in productivity leads to a real depreciation (appreciation) whereas the RER may appreciate or depreciate in highproduction-growth-rate. Using panel data, we conclude that a rise in productivity generally causes a real exchange rate appreciation in debtor countries, a depreciation in creditor countries, an appreciation in countries whose population growth rate is low.

Suggested Citation

  • Thi Hong Thinh Doan & Karine Gente, 2013. "Real Exchange Rate and Productivity in an OLG Model," Annals of Economics and Statistics, GENES, issue 109-110, pages 259-281.
  • Handle: RePEc:adr:anecst:y:2013:i:109-110:p:259-281
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    File URL: http://www.jstor.org/stable/23646434
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    1. Doan, Thi Hong Thinh & Gente, Karine, 2014. "Real exchange rate and productivity in a specific-factor model with skilled and unskilled labour," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 1-15.

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