Download or read book Does Productivity Growth Lead to Appreciation of the Real Exchange Rate written by Man-Keung Tang and published by International Monetary Fund. This book was released on 2003-07-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We revisit the time-honored link between productivity and the real exchange rate. Consistent with the traditional view, we find that higher labor productivity tends to lead to appreciation of the real exchange rate. Contrary to the traditional view, however, we find that the positive productivity effect is transmitted through the real exchange rate based on tradable prices, rather than through relative prices between tradables and nontradables. Moreover, higher total factor productivity is found, if anything, to lead to depreciation of the real exchange rate. These last two pieces of evidence provide support for the emerging view that limited tradability of goods and services provides scope for the strategic pricing decision, which has material consequences for the aggregate real exchange rate.
Download or read book Fundamental Determinants of Exchange Rates written by Jerome L. Stein and published by Oxford University Press. This book was released on 1997 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This book greatly enhances our understanding of the behavior of real exchange rates. It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of stock and flow considerations. The authors provide a masterful account of how changes in productivity and thrift affect the real exchange rate, and show that the long-run impact depends crucially on whether the change reflects the former fundamental (investment) or the latter (consumption). The empirical implementation uses state-of-the-art cointegration and error correction methodologies that are eminently well suited to capture the short-run adjustment of the real exchange rate to its medium- to long-run equilibrium value. The empirical results are extremely encouraging, as the economic fundamentals identified by the authors can explain a substantial part of the movement in the real exchange rate of a number of countries."--Peter Clark, International Monetary Fund
Download or read book Real Exchange Rate Levels Productivity and Demand Shocks written by Menzie David Chinn and published by International Monetary Fund. This book was released on 1997-05-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the long-run relationship between the real exchange rate, traded and nontraded productivity levels, and government spending for 14 OECD countries, using recently developed panel cointegration tests. The results indicate that under certain assumptions it is easier to detect cointegration in panel data than in the available time series; moreover, the rate of reversion to long-run equilibrium is estimated with greater precision. Using the model augmented by oil prices, we find that in 1991 (the last year productivity data are available) there is less overvaluation of the U.S. dollar than that implied by a naive version of purchasing power parity.
Download or read book Real Exchange Rates and the Prices of Nontradable Goods written by Mr.Gian Milesi-Ferretti and published by International Monetary Fund. This book was released on 1994-02-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Estimating the Equilibrium Real Exchange Rate written by Mr.Tarhan Feyzioglu and published by International Monetary Fund. This book was released on 1997-09-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: An equilibrium exchange rate is here defined as the level that is consistent with simultaneous internal and external balances as specified in Montiel (1996). Exogenous “fundamental” variables determining these balances are identified. Along the lines of Edwards (1994), a reduced form is estimated with the cointegration technique for Finland for the period 1975-95. The estimation produced a reasonable set of equilibrium exchange rates that appreciate with positive shocks to the terms of trade, world real interest rates, and the productivity differential between Finland and its trading partners.
Download or read book Real Exchange Rates In Developing Countries written by Mr.Mohsin S. Khan and published by International Monetary Fund. This book was released on 2004-10-01 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel data sample of 16 developing countries. The paper finds that the traded-nontraded productivity differential is a significant determinant of the relative price of nontraded goods, and the relative price in turn exerts a significant effect on the real exchange rate. The terms of trade also influence the real exchange rate. These results provide strong verification of Balassa-Samuelson effects for developing countries.
Download or read book Real Exchange Rates and Fundamentals written by Luca Antonio Ricci and published by International Monetary Fund. This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates.
Download or read book Real Exchange Rates and Productivity written by Ms.Jahanara Zaman and published by INTERNATIONAL MONETARY FUND. This book was released on 2000-06-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of productivity shocks on real exchange rate fluctuations in a dynamic international general equilibrium model with nontraded goods. The model predicts a close association between relative technology shocks and bilateral real exchange rate movements. Empirical results based on the data for Group of Seven countries are consistent with the predicted theoretical correlations. Using Johansen and Juselius (1990) multivariate cointegration tests the study finds that a statistically significant relationship exists between bilateral real exchange rates and international productivity differentials in the traded and nontraded sectors.
Download or read book Real Exchange Rates and Productivity Growth in the United States and Japan written by Richard C. Marston and published by . This book was released on 1989 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Real exchange rates between the yen and dollar based on general price indexes overestimate the competitiveness of the United States relative to Japan. High productivity growth in the traded sector of the Japanese economy results in a continuous fall in the prices of traded goods relative to nontraded goods in Japan. In order to keep U.S. traded goods competitive, the real exchange rate based on general price series like the GDP deflator or the CPI index must continually fall resulting in a real appreciation of the yen.This paper provides estimates of how far real exchange rates based on general price series would have had to fall over the 1973-83 period in order to keep U.S. traded goods competitive. The real exchange rate based on GDP deflators, for example, would have had to fall by 38% relative to the real exchange rate based on unit labor costs in the traded sector. The GDP series remained roughly constant over the period, thus giving the misleading impression that U.S. goods were still competitive despite a sharp rise in the relative price of U.S. traded goods. The paper also provides estimates of the relative wage changes which would have to occur to restore the competitiveness of U.S. traded goods
Download or read book Long Run Determinants of the Real Exchange Rate written by Mr.Hamid Faruqee and published by International Monetary Fund. This book was released on 1994-08-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the long-run determinants of the real exchange rate from a stock-flow perspective. The empirical analysis estimates a long-run relationship between the real exchange rate, net foreign assets and other factors affecting trade flows. Using postwar data for the United States and Japan, cointegration analysis supports the finding that the structural factors underlying each country’s net trade and net foreign asset positions determine the long-run path for the real value of the dollar and the yen. The empirical analysis also provides estimates for the underlying stochastic trend in each real exchange rate series.
Download or read book Do Long Run Productivity Differentials Explain Long Run Real Exchange Rates written by Mr.Enrique G. Mendoza and published by International Monetary Fund. This book was released on 1994-05-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a two-country, balanced-growth intertemporal general equilibrium model to examine two predictions of the Balassa-Samuelson model, namely that (i) productivity differentials determine the domestic relative price of nontradables and (ii) deviations from purchasing power parity reflect differences in the relative price of nontradables. In our model, the equilibrium relative price of nontradables along the long-run balanced-growth path is determined by the ratio of the marginal products of labor in the tradable and nontradable sectors. The empirical relevance of the Balassa-Samuelson predictions is examined using the Hodrick-Prescott filter to extract long-run components from a panel database for fourteen OECD countries. The evidence indicates that labor productivity differentials do explain long-run, cross-country differences in relative prices. The predicted relative prices, however, are of little help in explaining long-run deviations from purchasing power parity.
Download or read book The Usual Suspects written by Menzie David Chinn and published by . This book was released on 1997 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The evidence for a productivity-based explanation for real exchange rate behavior of East Asian currencies is examined. Using sectoral output and employment data, relative prices and relative productivities are calculated for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. Time series regressions of the real exchange rate on relative prices indicate a role for relative prices for Indonesia, Japan and Korea. When examining real exchange rates and relative productivity ratios, one finds a relationship for Japan, Malaysia, and the Philippines. Only when augmenting the regressions with real oil prices are significant relationships obtained for Indonesia and Korea. Panel regression results are slightly more supportive of a relative price view of real exchange rates. However, the panel regressions incorporating productivity variables, as well as other demand side factors, are less encouraging, except for a small subset of countries (Indonesia, Japan, Korea, Malaysia and the Philippines). Surprisingly, government spending does not appear to be a determinant of real exchange rates in the region.
Download or read book What Determines Real Exchange Rates The Long and Short of it written by Ronald MacDonald and published by International Monetary Fund. This book was released on 1997-02 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.
Download or read book Equilibrium Exchange Rates written by Ronald MacDonald and published by Springer Science & Business Media. This book was released on 1999-07-31 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt: How successful is PPP, and its extension in the monetary model, as a measure of the equilibrium exchange rate? What are the determinants and dynamics of equilibrium real exchange rates? How can misalignments be measured, and what are their causes? What are the effects of specific policies upon the equilibrium exchange rate? The answers to these questions are important to academic theorists, policymakers, international bankers and investment fund managers. This volume encompasses all of the competing views of equilibrium exchange rate determination, from PPP, through other reduced form models, to the macroeconomic balance approach. This volume is essentially empirical: what do we know about exchange rates? The different econometric and theoretical approaches taken by the various authors in this volume lead to mutually consistent conclusions. This consistency gives us confidence that significant progress has been made in understanding what are the fundamental determinants of exchange rates and what are the forces operating to bring them back in line with the fundamentals.
Download or read book Real Exchange Rates and Competitiveness written by Mr.Leslie Lipschitz and published by International Monetary Fund. This book was released on 1991-03 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines indicators of competitiveness. It analyzes the conceptual foundations of conventional measures of the real exchange rate and finds that inferences about competitiveness from these indicators require strong, and in many cases implausible, assumptions. Based on this analysis some alternative measures are proposed and their use is illustrated using data from Europe. Given the usefulness of standardized indicators, four simple charts are proposed; these help solve some conundrums in the European data and provide the basis for a richer set of inferences about competitiveness.
Download or read book Real Exchange Rates and Sectoral Productivity in the Eurozone written by Martin Berka and published by . This book was released on 2014 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price dynamic general equilibrium model to generate a cross-section and time series of real exchange rates that can be directly compared to the data. Under the assumption of a common currency, estimates from simulated regressions are very similar to the empirical estimates for the Eurozone. Our findings contrast with previous studies that have found little relationship between productivity levels and the real exchange rate among high-income countries, but those studies have included country pairs which have a floating nominal exchange rate.
Download or read book Systematic Movements in Real Exchange Rates in the G 5 written by Richard C. Marston and published by . This book was released on 1990 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many recent studies have documented the random behavior of real exchange rates. This paper shows that real exchange rates defined for different sectors of an economy move closely together with one another even though each of the sectoral real exchange rates taken alone has a large random component. The sectoral real exchange rates are tied together by internal price links due to factor mobility within each national economy. Any differences between real exchange rates which develop, moreover, can be explained almost entirely by productivity differentials, at least in the long run. This paper contrasts the strong ties which bind together prices from different sectors internally with ties that bind the prices of goods from the same sector internationally. Prices are shown to be much more highly correlated internally than externally because flexible exchange rates disrupt normal pricing relationships between goods from different countries.
