NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Roles of the Terms of Trade and Nontraded-Good-Prices in Exchange Rate Variations

Alan C. Stockman, Harris Dellas

NBER Working Paper No. 1342 (Also Reprint No. r1328)
Issued in May 1984
NBER Program(s):International Trade and Investment Program, International Finance and Macroeconomics Program

This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.

download in pdf format
   (190 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1342

Published: "International Portfolio Nondiversification and Exchange Rate Variability." From Journal of International Economics, Vol. 26, No. 3/4, pp. 271-289,(May 1989).

Users who downloaded this paper also downloaded* these:
Edwards and van Wijnbergen w2365 Tariffs, the Real Exchange Rate and the Terms of Trade: On Two Popular Propositions in International Economics
De Gregorio and Wolf w4807 Terms of Trade, Productivity, and the Real Exchange Rate
Edwards w2175 Tariffs, Terms of Trade, and the Real Exchange Rate in an Intertemporal Optimizing Model of the Current Account
Edwards w2629 Temporary Terms of Trade Disturbances, The Real Exchange Rate and the Current Account
Arcidiacono, Bayer, Blevins, and Ellickson w18449 Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us