Financial Liberalization, Structural Change, and Real Exchange Rate Appreciations

WPIEA2010063 Image
Price:  $18.00

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

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Description

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.

Taxonomy

International trade , Trade liberalization




More publications in this series: Working Papers


More publications by: Carlos Urrutia ; Felipe Meza