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Remoteness and Real Exchange Rate Volatility

Author/Editor: Bravo-Ortega, Claudio | di Giovanni, Julian
Authorized for Distribution: January 1, 2005
Electronic Access: Free Full Text (PDF file size is 735KB)
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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 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. 05/01
Subject(s): Real effective exchange rates | Exchange rate variability | Trade models
Author's keyword(s): Real exchange rate volatility | Trade costs | Comparative advantage
 
English  
    Published:   January 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005001   Pages:   20
    Price:   US$15.00
       
     
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