Real exchange rate movements and the relative price of non-traded goods

Caroline Marie Betts and Timothy J. Kehoe ()

No 415, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: We study the quarterly bilateral real exchange rate and the relative price of non-traded to traded goods for 1225 country pairs over 1980?2005. We show that the two variables are positively correlated, but that movements in the relative price measure are smaller than those in the real exchange rate. The relation between the two variables is stronger when there is an intense trade relationship between two countries and when the variance of the real exchange rate between them is small. The relation does not change for rich/poor country bilateral pairs or for high inflation/low inflation country pairs. We identify an anomaly: The relation between the real exchange rate and relative price of non-traded goods for US/EU bilateral trade partners is unusually weak.

Keywords: Trade (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-opm
Date: 2008
View list of references View citations in EconPapers

Downloads: (external link)
http://www.minneapolisfed.org/research/SR/SR415.pdf (application/pdf)

Related works:
Working Paper: Real Exchange Rate Movements and the Relative Price of Non-traded Goods (2008)
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: http://EconPapers.repec.org/RePEc:fip:fedmsr:415

Ordering information: This working paper can be ordered from
http://www.minneapolisfed.org/pubs/

Access Statistics for this paper

More papers in Staff Report from Federal Reserve Bank of Minneapolis
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().