Home bias, distribution services and determinants of real exchange rates

Maxym Chaban

Journal of Macroeconomics, 2011, vol. 33, issue 4, 793-806

Abstract: This paper examines empirically how exogenous changes in the terms of trade affect the real exchange rate through the relative price of traded goods with Canada–US data. The relative price of traded goods is constructed using prices at the dock and retail prices. The first measure emphasizes the importance of home bias in consumption of traded goods. The second measure highlights the importance of distribution services required for consumption of traded goods. It is found that terms of trade shocks affect the relative price of traded goods using both measures. A possible interpretation of empirical findings is that home bias and distribution services are important for understanding the relative price of traded goods.

Keywords: Distribution services; Home bias; Traded goods; Nontraded goods; Terms of trade; Real exchange rate (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:33:y:2011:i:4:p:793-806

DOI: 10.1016/j.jmacro.2011.03.004

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