Real Exchange Rates and Productivity : Closed-Form Solutions and Some Empirical Evidence

Author/Editor:

Jahanara Zaman

Publication Date:

June 1, 2000

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 productivity shocks on real exchange rate fluctuations in a dynamic international general equilibrium model with nontraded goods. The model predicts a close association between relative technology shocks and bilateral real exchange rate movements. Empirical results based on the data for Group of Seven countries are consistent with the predicted theoretical correlations. Using Johansen and Juselius (1990) multivariate cointegration tests the study finds that a statistically significant relationship exists between bilateral real exchange rates and international productivity differentials in the traded and nontraded sectors.

Series:

Working Paper No. 00/99

Subject:

English

Publication Date:

June 1, 2000

ISBN/ISSN:

9781451852264/1018-5941

Stock No:

WPIEA0992000

Format:

Paper

Pages:

38

Please address any questions about this title to publications@imf.org