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Real Exchange Rates in a Model of Structural Change: Applications to the Real Yen-Dollar and Chinese RMB-Dollar Exchange Rates


  • Robert Dekle

    (University of Southern California (Email:


We tackle the important issue of what the appropriate trends in the real Yen-Dollar andRMB-Dollar are over time. Over the long-run, the real yen has been appreciating against the U.S. dollar; while the real RMB-dollar rate has been depreciating (until 1999). In this paper, we build a macroeconomic-trade model of Japan-U.S. trade on theone hand, and China-U.S. trade on the other. Our model is essentially a general equilibrium extension of the Balassa-Samuelson effect. We show that these long-run trends in the real yen-dollar and RMB-dollar rates in the data can be justified by our model.

Suggested Citation

  • Robert Dekle, 2013. "Real Exchange Rates in a Model of Structural Change: Applications to the Real Yen-Dollar and Chinese RMB-Dollar Exchange Rates," IMES Discussion Paper Series 13-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:13-e-02

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    References listed on IDEAS

    1. Dekle, Robert & Fukao, Kyoji, 2009. "The Japan-U.S. Exchange Rate, Productivity, and the Competitiveness of Japanese Industries," CEI Working Paper Series 2008-25, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    2. Asea, Patrick K & Mendoza, Enrique G, 1994. "The Balassa-Samuelson Model: A General-Equilibrium Appraisal," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 244-267, October.
    3. Kiminori Matsuyama, 2009. "Structural Change in an Interdependent World: A Global View of Manufacturing Decline," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 478-486, 04-05.
    4. De Gregorio, Jose & Giovannini, Alberto & Wolf, Holger C., 1994. "International evidence on tradables and nontradables inflation," European Economic Review, Elsevier, vol. 38(6), pages 1225-1244, June.
    5. Uy, Timothy & Yi, Kei-Mu & Zhang, Jing, 2013. "Structural change in an open economy," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 667-682.
    6. Bodenstein, Martin, 2010. "Trade elasticity of substitution and equilibrium dynamics," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1033-1059, May.
    7. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688 Elsevier.
    8. Radoslaw Stefanski, 2014. "Structural Transformation and the Oil Price," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 484-504, July.
    9. Murat Üngör, 2009. "De-industrialization of the Riches and the Rise of China," DEGIT Conference Papers c014_040, DEGIT, Dynamics, Economic Growth, and International Trade.
    10. repec:wsi:serxxx:v:52:y:2007:i:03:n:s0217590807002750 is not listed on IDEAS
    11. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
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    More about this item


    equilibrium real exchange rates; Balassa-Samuelson effect; structural transformation; sectoral change; productivity;

    JEL classification:

    • F3 - International Economics - - International Finance

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