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Real Exchange Rates and the Prices of Nontradable Goods

Author

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  • S. Micossi
  • Gian M Milesi-Ferretti

Abstract

This paper attempts to provide a perspective on real exchange rate developments following the inception of the EMS. The focus is on structural determinants of real exchange rates, notably the behavior of tradables and nontradable prices and productivity. It is found that changes in the relative price of tradable goods in terms of nontradables account for a sizable fraction of real exchange rate dynamics during the EMS period. Sectoral productivity growth differential help explain the behavior of the relative price of tradable goods, especially in the long run. There is also some evidence that the EMS has extended on relative price behavior.

Suggested Citation

  • S. Micossi & Gian M Milesi-Ferretti, 1994. "Real Exchange Rates and the Prices of Nontradable Goods," IMF Working Papers 94/19, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:94/19
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    Cited by:

    1. Menzie Chinn & Louis Johnston, 1996. "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," NBER Working Papers 5709, National Bureau of Economic Research, Inc.
    2. Guo, Qian & Hall, Stephen G., 2010. "A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 57-78, July.
    3. Alessio Emanuele BIONDO, 2010. "The Law of One Price: Survey of a Failure," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(2), pages 168-182, December.
    4. Razzak, Weshah, 2005. "Explaining the gaps in labour productivity in some developed countries," MPRA Paper 1888, University Library of Munich, Germany, revised May 2006.
    5. Paul R. Bergin & Reuven Glick & Alan M. Taylor, 2017. "Productivity, Tradability, and the Long-Run Price Puzzle," World Scientific Book Chapters,in: International Macroeconomic Interdependence, chapter 8, pages 211-248 World Scientific Publishing Co. Pte. Ltd..
    6. International Monetary Fund, 2002. "Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime," IMF Working Papers 02/190, International Monetary Fund.
    7. Strauss, Jack, 1999. "Productivity differentials, the relative price of non-tradables and real exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(3), pages 383-409.
    8. Kovács, Mihály András, 1999. "Reálárfolyam-mutatók és a magyar gazdaság ár- és költség-versenyképessége
      [Indicators of real exchange rates and the price and cost efficiency of the Hungarian economy]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 145-175.
    9. Peter Backé & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2002. "Price Dynamics in Central and Eastern European EU Accession," Working Papers 61, Oesterreichische Nationalbank (Austrian Central Bank).
    10. Matthew Canzoneri & Robert Cumby & Behzad Diba & Gwen Eudey, 1998. "Trends in European Productivity: Implications for Real Exchange Rates, Real Interest Rates and Inflation Differentials," Working Papers 27, Oesterreichische Nationalbank (Austrian Central Bank).
    11. Vishal Jaunky, 2007. "The real exchange rate and productivity differentials: a panel cointegration approach," Applied Economics Letters, Taylor & Francis Journals, vol. 15(4), pages 313-318.
    12. Carmen Mar? Mart?ez, 2003. "Current Account Imbalances, Thriftiness And The Real Exchange Rate In A Growing Economy," UFAE and IAE Working Papers 589.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

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