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What Determines Real Exchange Rates? The Nordic Countries

  • Anders Bergvall
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    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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    Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

    Volume (Year): 106 (2004)
    Issue (Month): 2 (06)
    Pages: 315-337

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    Handle: RePEc:bla:scandj:v:106:y:2004:i:2:p:315-337
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    1. Matthew B. Canzoneri & Robert E. Cumby & Behzad Diba, 1996. "Relative Labor Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries," NBER Working Papers 5676, National Bureau of Economic Research, Inc.
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