The Behavior of Nontradable Goods Prices in Europe: Evidence and Interpretation

ByJose De Gregorio, Thomas Krueger, Alberto Giovannini

May 1, 1993

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 evolution of the relative price between tradable and nontradable goods in a group of European countries. A model of an open economy is used to analyze different factors that can account for an increase in the relative price of nontradable goods. These factors are: (a) faster technological progress in the tradable goods sector; (b) demand shifts toward nontradable goods; and (c) real wage pressures. The relevance of these factors is analyzed empirically for France, Germany, Italy, Spain and the United Kingdom.

Subject: Foreign exchange, Labor, Labor demand, Labor productivity, Production, Real exchange rates, Real wages, Total factor productivity

Keywords: Europe, exchange rate, goods market imperfection, goods sector, Labor demand, Labor productivity, nontradable goods, present discounted value, price level, Real exchange rates, real wage, Real wages, Total factor productivity, WP

Pages:
62
Volume:
1993
DOI:
https://doi.org/10.5089/9781451974263.001
Issue:
045
Series:
Working Paper No. 1993/045
Stock No:
WPIEA0451993
ISBN:
9781451974263
ISSN:
1018-5941

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