Real Exchange Rates and Sectoral Productivity in the Eurozone

Charles Engel, Michael Devereux and Martin Berka

No 10203, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Balassa-samuelson; Eurozone; Real exchange rates; Total factor productivity; Unit labor cost (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-eec and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://cepr.org/publications/DP10203 (application/pdf)

Related works:
Journal Article: Real Exchange Rates and Sectoral Productivity in the Eurozone (2018)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2017)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2017)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2017)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2015)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2014)
Working Paper: Real exchange rates and sectoral productivity in the Eurozone (2014)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10203

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10203

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().