Deviations in real exchange rate levels in the OECD countries and their structural determinants

Martin Berka and Daan Steenkamp

Working Papers from CEPII research center

Abstract: We study the validity of an augmented Balassa-Samuelson theory in a panel of real exchange rate levels across 17 OECD countries between 1970 and 2012 using a unique panel of levels of total factor productivity (TFP) across sectors. We find that real exchange rates can be explained by relative sectoral TFP levels both across countries and over time in the direction predicted by Balassa-Samuelson hypothesis. We also show that drivers of labour wedges such as structural labour market differences are important in explaining real exchange rate levels. Nevertheless, large average conditional deviations in real exchange rate levels remain across countries in our sample.

Keywords: Balassa-Samuelson; Real Exchange Rates; OECD; Total Factor Productivity; Labour Wedge; Unit Labour Cost (search for similar items in EconPapers)
JEL-codes: E12 E23 E24 F31 F33 F41 F43 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Deviations in Real Exchange Rate Levels in the OECD Countries and their Structural Determinants (2018)
Working Paper: Deviations in real exchange rate levels in the OECD countries and their structural determinants (2018)
Working Paper: Deviations in real exchange rate levels in the OECD countries and their structural determinants (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2018-16

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