Real Exchange Rates In Developing Countries Are Balassa-Samuelson Effects Present?

There is little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel data sample of 16 developing countries. The paper finds that the traded-nontraded...

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Bibliographic Details
Main Author: Khan, Mohsin
Other Authors: Choudhri, Ehsan
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2004
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Economic policy 
653 |a Income 
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653 |a Productivity 
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653 |a Exports and Imports 
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653 |a International economics 
653 |a Labor Productivity 
653 |a Macroeconomics: Production 
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520 |a There is little empirical research on whether Balassa-Samuelson effects can explain the long-run behavior of real exchange rates in developing countries. This paper presents new evidence on this issue based on a panel data sample of 16 developing countries. The paper finds that the traded-nontraded productivity differential is a significant determinant of the relative price of nontraded goods, and the relative price in turn exerts a significant effect on the real exchange rate. The terms of trade also influence the real exchange rate. These results provide strong verification of Balassa-Samuelson effects for developing countries