Remoteness and Real Exchange Rate Volatility
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Summary:
This paper examines the impact of trade costs on real exchange rate volatility. The channel is examined by constructing a two-country Ricardian model of trade, based on the work of Dornbusch, Fischer, and Samuelson (1977), which shows that higher trade costs result in a larger nontradable sector. This, in turn, leads to higher real exchange rate volatility. We provide empirical evidence supporting the channel.
Series:
Working Paper No. 2005/001
Subject:
Exchange rate adjustments Exports Foreign exchange Income International trade National accounts Real exchange rates Tariffs Taxes
English
Publication Date:
January 1, 2005
ISBN/ISSN:
9781451860207/1018-5941
Stock No:
WPIEA2005001
Pages:
21
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