IDEAS home Printed from
   My bibliography  Save this paper

Interdependency of Real Exchange Rate, Trade, Innovation, Structural Change and Growth


  • Paul J.J. Welfens

    () (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))


This paper analyzes the impact of the real exchange rate on trade, structural change and growth. We point out a new approach to monetary growth policy in an open economy with trade and foreign direct investment. Moreover, the analysis presents a paradox effect with respect to the link between process innovations and the price level: The latter can rise if there are process innovations provided that the income elasticity of the demand for money is between zero and unity. We also look into the more traditional Balassa-Samuelson effects and consider the major impact of real exchange rate changes on structural change and on economic growth, the latter including a modified neoclassical model with endogenous growth. In addition, we consider aspects of optimum growth. Main policy conclusions are that one should avoid massive overshooting. Poor countries willing to catch up with partner countries in an integration area would be well advised to promote foreign direct investment inflows and to stimulate upgrading of human capital. Supporting R&D is also crucial for economic catching up.

Suggested Citation

  • Paul J.J. Welfens, 2005. "Interdependency of Real Exchange Rate, Trade, Innovation, Structural Change and Growth," EIIW Discussion paper disbei139, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:eiiwdp:disbei139

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    real exchange rate; monetary growth policy; economic growth; innovation;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bwu:eiiwdp:disbei139. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frank Hoffmann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.