Financial Liberalization, Structural Change, and Real Exchange Rate Appreciations

WPIEA2010063 Image
Price:  $18.00

Author/Editor: Felipe Meza, Carlos Urrutia
Release Date: © March, 2010
ISBN : 978-1-45198-207-7
Stock #: WPIEA2010063
Stock Status: On back-order

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We account for the appreciation of the real exchange rate in Mexico between 1988 and 2002 using a two sector dynamic general equilibrium model of a small open economy with two driving forces: (i) differential productivity growth across sectors and (ii) a decline in the cost of borrowing in foreign markets. These two mechanisms account for 60 percent of the decline in the relative price of tradable goods and explain a large fraction of the reallocation of labor across sectors. We do not find a significant role for migration remittances, foreign reserves accumulation, government spending, terms of trade, or import tariffs.


International trade , Trade liberalization

More publications in this series: Working Papers

More publications by: Felipe Meza ; Carlos Urrutia