Terms of Trade, Productivity, and the Real Exchange RateJose De Gregorio, Holger C. Wolf
NBER Working Paper No. 4807 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.
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Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w4807 Users who downloaded this paper also downloaded these:
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