Year: 1994
Type: report
Abstract: The paper examines the effects of terms of trade movements and productivity differentials across sectors on the behavior of the real exchange rate. We develop a simple model of a small open economy producing exportable and nontradable goods and consuming importable and nontradable goods and present empirical evidence for a sample of fourteen OECD countries. The evidence broadly supports the predictions of the model, namely that faster productivity growth in the tradable relative to the nontradable sector and an improvement in the terms of trade induce a real appreciation.
DOI: 10.3386/w4807
Authors: Jose De Gregorio, Holger Wolf
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2118525253