Real Exchange Rates and Sectoral Productivity in the Eurozone

Martin Berka, Michael Devereux and Charles Engel

American Economic Review, 2018, vol. 108, issue 6, 1543-81

Abstract: We investigate the link between real exchange rates and sectoral TFP for eurozone countries. We show that real exchange rate variation, both cross-country and time-series, closely accords with an amended Balassa-Samuelson interpretation, incorporating sectoral productivity shocks and a labor market wedge. We construct a DSGE model to generate a cross section and time series of real exchange rates to compare to data. Estimates from simulated regressions are very similar to estimates for eurozone data. Our findings contrast with previous studies that have found little relationship between productivity and real exchange rates among high-income countries that have floating nominal exchange rates.

JEL-codes: E12 E23 E24 F31 F33 F43 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20151045
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Citations: View citations in EconPapers (56)

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Related works:
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)
Working Paper: Real Exchange Rates and Sectoral Productivity in the Eurozone (2014)
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