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Real exchange rate fluctuations and the relative importance of nontradables


  • Ouyang, Alice Y.
  • Rajan, Ramkishen S.


The real exchange rate is one of the most important price variables in macroeconomics as changes in it have implications for both external competitiveness as well as internal sectoral resource allocation. This paper decomposes real exchange rate volatility into its two components for a panel of 51 economies over the period 1990–2010 and specifically estimates the relative importance of internal prices in real exchange rate fluctuations. Unlike other studies, this paper goes a step further and examines the role of a set of economic fundamentals in explaining the relative contribution of the non-traded component in real exchange rate fluctuations.

Suggested Citation

  • Ouyang, Alice Y. & Rajan, Ramkishen S., 2013. "Real exchange rate fluctuations and the relative importance of nontradables," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 844-855.
  • Handle: RePEc:eee:jimfin:v:32:y:2013:i:c:p:844-855 DOI: 10.1016/j.jimonfin.2012.07.006

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    References listed on IDEAS

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    Cited by:

    1. repec:kap:iaecre:v:23:y:2017:i:2:d:10.1007_s11294-017-9635-y is not listed on IDEAS
    2. Seoane, Hernán D., 2016. "Parameter drifts, misspecification and the real exchange rate in emerging countries," Journal of International Economics, Elsevier, vol. 98(C), pages 204-215.
    3. Al-Abri, Almukhtar, 2013. "Real exchange rate volatility, terms-of-trade shocks, and financial integration in primary-commodity exporting economies," Economics Letters, Elsevier, vol. 120(1), pages 126-129.
    4. Ouyang, Alice Y. & Rajan, Ramkishen S. & Li, Jie, 2016. "Exchange rate regimes and real exchange rate volatility: Does inflation targeting help or hurt?," Japan and the World Economy, Elsevier, vol. 39(C), pages 62-72.

    More about this item


    Nontradables; Purchasing Power Parity (PPP); Real exchange rate; Tradables;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications


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