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Real Exchange Rates in Developing Countries: Are Balassa-Samuelson Effects Present?
Author/Editor: Mohsin S. Khan, Ehsan U. Choudhri
Release Date: © October, 2004
ISBN : 978-1-45185-959-1
Stock #: WPIEA1882004
Stock Status: Available
Languages and formats available
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.
More publications in this series: Working Papers