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Transfer Effect in National Price Levels

  • Jaewoo Lee

    ()

A model of national price levels is developed to lay bare implicit assumptions behind the conventional view on the effect of productivity differentials and net foreign assets. The effect of productivity on national price levels is determined by the interaction of several countervailing channels, implying that the net effect can go in either direction for reasonable parameter values. By comparison, net foreign assets have a more robust effect on national price levels than productivity differentials. Basic theoretical implications are confirmed by the price level data of OECD countries.

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File URL: http://hdl.handle.net/10.1007/s10290-007-0120-1
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Article provided by Springer in its journal Review of World Economics.

Volume (Year): 143 (2007)
Issue (Month): 3 (October)
Pages: 534-556

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Handle: RePEc:spr:weltar:v:143:y:2007:i:3:p:534-556
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  1. 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.
  2. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-34, March.
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  16. Kraay, Aart & Ventura, Jaume, 1997. "Current accounts in debtor and creditor countries," Policy Research Working Paper Series 1825, The World Bank.
  17. Kravis, Irving B, 1984. "Comparative Studies of National Incomes and Prices," Journal of Economic Literature, American Economic Association, vol. 22(1), pages 1-39, March.
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