Real Exchange Rates in Growing Economies : How Strong Is the Role of the Nontradables Sector?

Author/Editor:

Ken Miyajima

Publication Date:

December 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper emphasizes the importance of total factor productivity (TFP) developments in the nontradables sector to quantitatively demonstrate that the time-honored Balassa-Samuelson hypothesis does not generally apply to episodes of economic growth. Though the Balassa- Samuelson hypothesis postulates that strong economic growth should, in general, be accompanied by a real appreciation in exchange rates, this paper does not find such systematic links. This is because some growth spurts are marked by equal TFP gains in both the tradables and nontradables sectors, and others by larger TFP gains in the nontradables sector.

Series:

Working Paper No. 05/233

Subject:

English

Publication Date:

December 1, 2005

ISBN/ISSN:

9781451862522/1018-5941

Stock No:

WPIEA2005233

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

35

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