Remoteness and Real Exchange Rate Volatility

January 1, 2005

Download PDF

More Formats on IMF eLibrary

Order a Print Copy

More formats on IMF eLibrary

Order a Print Copy

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.

Subject: Exchange rate adjustments, Exports, Foreign exchange, Income, International trade, National accounts, Real exchange rates, Tariffs, Taxes

Keywords: Africa, comparative advantage, Exchange rate adjustments, exchange rate volatility, Exports, Income, low income, nontradable goods, productivity shock, Real exchange rate volatility, Real exchange rates, Tariffs, trade cost, trade costs, transport cost, volatility decrease, WP

Pages:
21
Volume:
2005
DOI:
https://doi.org/10.5089/9781451860207.001
Issue:
001
Series:
Working Paper No. 2005/001
Stock No:
WPIEA2005001
ISBN:
9781451860207
ISSN:
1018-5941

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers