Real Exchange Rates In Developing Countries: Are Balassa-Samuelson Effects Present?

Mohsin Khan and Ehsan Choudhri ()

No 2004/188, IMF Working Papers from International Monetary Fund

Abstract: There is little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel data sample of 16 developing countries. The paper finds that the traded-nontraded productivity differential is a significant determinant of the relative price of nontraded goods, and the relative price in turn exerts a significant effect on the real exchange rate. The terms of trade also influence the real exchange rate. These results provide strong verification of Balassa-Samuelson effects for developing countries.

Keywords: WP (search for similar items in EconPapers)
Pages: 22
Date: 2004-10-01
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Citations: View citations in EconPapers (38)

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Journal Article: Real Exchange Rates in Developing Countries: Are Balassa-Samuelson Effects Present? (2005)
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