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Real Exchange Rates in Developing Countries: Are Balassa-Samuelson Effects Present?

Author/Editor: Choudhri, Ehsan U. | Khan, Mohsin S.
Authorized for Distribution: October 1, 2004
Electronic Access: Free Full Text (PDF file size is 289KB)
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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: There is little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel data sample of 16 developing countries. The paper finds that the traded-nontraded productivity differential is a significant determinant of the relative price of nontraded goods, and the relative price in turn exerts a significant effect on the real exchange rate. The terms of trade also influence the real exchange rate. These results provide strong verification of Balassa-Samuelson effects for developing countries.
 
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Series: Working Paper No. 04/188
Subject(s): Real effective exchange rates | Developing countries | Productivity
Author's keyword(s): Real Exchange Rates | Balassa-Samuelson Effects | Developing Countries
 
English  
    Published:   October 1, 2004        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1882004   Pages:   22
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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