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Transfer Effect in National Price Levels

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  • Jaewoo Lee

    (IMF)

Abstract

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.

Suggested Citation

  • Jaewoo Lee, 2005. "Transfer Effect in National Price Levels," International Finance 0512004, EconWPA.
  • Handle: RePEc:wpa:wuwpif:0512004
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    References listed on IDEAS

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    Cited by:

    1. Hoffmann, Mathias & Tillmann, Peter, 2012. "International financial integration and national price levels: The role of the exchange rate regime," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1503-1528.
    2. Peltonen, Tuomas & Sager, Michael, 2009. "Productivity shocks and real exchange rate: a reappraisal," Working Paper Series 1046, European Central Bank.

    More about this item

    Keywords

    price levels; productivity; net foreign assets;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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