Real Exchange Rates and Fundamentals: Evidence from 15 OECD Countries

Annika Alexius () and Jonny Nilsson

Open Economies Review, 2000, vol. 11, issue 4, 383-397

Abstract: In an extended Balassa–Samuelson model, long-run real exchange rates are determined by relative productivity and terms of trade. We present evidence of systematic long-run relationships between these fundamental variables and real exchange rates in a data set covering 15 OECD countries from 1960 to 1996. High relative productivity is associated with real exchange rate appreciations in most cases. There is less support for the hypothesis that the terms of trade affect equilibrium real exchange rates. Copyright Kluwer Academic Publishers 2000

Keywords: real exchange rates; Balassa–Samuelson model (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1008378610758

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