Real exchange rate fluctuations and the relative importance of nontradables

Alice Ouyang () and Ramkishen Rajan

Journal of International Money and Finance, 2013, vol. 32, issue C, 844-855

Abstract: The real exchange rate is one of the most important price variables in macroeconomics as changes in it have implications for both external competitiveness as well as internal sectoral resource allocation. This paper decomposes real exchange rate volatility into its two components for a panel of 51 economies over the period 1990–2010 and specifically estimates the relative importance of internal prices in real exchange rate fluctuations. Unlike other studies, this paper goes a step further and examines the role of a set of economic fundamentals in explaining the relative contribution of the non-traded component in real exchange rate fluctuations.

Keywords: Nontradables; Purchasing Power Parity (PPP); Real exchange rate; Tradables (search for similar items in EconPapers)
JEL-codes: F30 F31 F47 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:32:y:2013:i:c:p:844-855

DOI: 10.1016/j.jimonfin.2012.07.006

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