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What Determines Real Exchange Rates? The Nordic Countries

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  • Anders Bergvall

Abstract

The model derived in this paper yields testable implications concerning the long-run co-movements of real exchange rates, relative labor productivity, the trade balance and terms of trade. Countries with relatively higher output growth, 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. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .

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  • Anders Bergvall, 2004. "What Determines Real Exchange Rates? The Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 315-337, June.
  • Handle: RePEc:bla:scandj:v:106:y:2004:i:2:p:315-337
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    Cited by:

    1. Tsen, Wong Hock, 2011. "The real exchange rate determination: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 800-811, October.
    2. Nils Holinski & Robert Vermeulen, 2012. "The international wealth channel: a global error-correcting analysis," Empirical Economics, Springer, vol. 43(3), pages 985-1010, December.
    3. Kisswani, Khalid M. & Nusair, Salah A., 2013. "Non-linearities in the dynamics of oil prices," Energy Economics, Elsevier, vol. 36(C), pages 341-353.
    4. Saleem, Kashif & Vaihekoski, Mika, 2010. "Time-varying global and local sources of market and currency risks in Russian stock market," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 686-697, October.
    5. Habib, Maurizio Michael & Kalamova, Margarita Manolova, 2007. "Are there oil currencies? The real exchange rate of oil exporting countries," Working Paper Series 839, European Central Bank.
    6. Wu, Gang & Zhang, Yue-Jun, 2014. "Does China factor matter? An econometric analysis of international crude oil prices," Energy Policy, Elsevier, vol. 72(C), pages 78-86.

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