Terms of Trade, Productivity, and the Real Exchange Rate

Jose De Gregorio and Holger C. Wolf

No 4807, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper examines the effects of terms of trade movements and productivity differentials across sectors on the behavior of the real exchange rate. We develop a simple model of a small open economy producing exportable and nontradable goods and consuming importable and nontradable goods and present empirical evidence for a sample of fourteen OECD countries. The evidence broadly supports the predictions of the model, namely that faster productivity growth in the tradable relative to the nontradable sector and an improvement in the terms of trade induce a real appreciation.

JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 1994-07
Note: IFM
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Citations: View citations in EconPapers (225)

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Working Paper: Terms of Trade, Productivity, and the Real Exchange Rate (1994)
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