Remoteness and Real Exchange Rate Volatility

International Monetary Fund
Authors registered in the RePEc Author Service: Julian di Giovanni and Claudio Bravo-Ortega ()

No 05/01, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the impact of trade costs on real exchange rate volatility. The channel is examined by constructing a two-country Ricardian model of trade, based on the work of Dornbusch, Fischer, and Samuelson (1977), which shows that higher trade costs result in a larger nontradable sector. This, in turn, leads to higher real exchange rate volatility. We provide empirical evidence supporting the channel.

New Economics Papers: this item is included in nep-fin, nep-fmk, nep-ifn and nep-int
Date: 2005-01-01
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Journal Article: Remoteness and Real Exchange Rate Volatility (2006)
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