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What Determines Real Exchange Rates? The Nordic Countries

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  • Bergvall, Anders

    () (Department of Economics)

Abstract

This paper presents a model yielding testable implications concerning the long-run co-movements of real exchange rates, relative productivity, the trade balance and terms of trade. Countries with higher productivity, 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.

Suggested Citation

  • Bergvall, Anders, 2002. "What Determines Real Exchange Rates? The Nordic Countries," Working Paper Series 2002:15, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2002_015
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    Cited by:

    1. Anders Bergvall, 2004. "What Determines Real Exchange Rates? The Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 315-337, June.
    2. Colque H., Paul, 2006. "Fundamentos del Tipo de Cambio Real de Equilibrio," Documentos de trabajo 4/2006, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    3. Sellin, Peter, 2007. "Using a New Open Economy Macroeconomics model to make real nominal exchange rate forecasts," Working Paper Series 213, Sveriges Riksbank (Central Bank of Sweden).

    More about this item

    Keywords

    Real exchange rates; cointegration; variance decomposition;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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