Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5083684 | International Review of Economics & Finance | 2014 | 15 Pages |
Abstract
The paper examines the Canada-US real exchange rate since the early 1970s to test two popular explanations of the long-run real exchange rate based on the influence of sectoral productivities and commodity prices. The empirical analysis finds that both variables exert a significant long-run effect. However, the relation for the real exchange rate has shifted as the effect of each variable has become stronger and a positive trend is present since 1990. The effect of productivity, moreover, is opposite to that predicted by the standard Balassa-Samuelson theory. An explanation of these findings is suggested based on a general-equilibrium model that includes differentiated traded manufactures and homogeneous commodities.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Ehsan U. Choudhri, Lawrence L. Schembri,