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2 edition of Real exchange rate levels, productivity and demand shocks found in the catalog.

Real exchange rate levels, productivity and demand shocks

Menzie David Chinn

Real exchange rate levels, productivity and demand shocks

evidence from a panel of 14 countries

by Menzie David Chinn

  • 99 Want to read
  • 27 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Foreign exchange rates -- Econometric models.,
  • Industrial productivity -- Econometric models.,
  • Business cycles -- Econometric models.

  • Edition Notes

    StatementMenzie Chinn, Louis Johnston.
    SeriesNBER working paper series -- working paper 5709, Working paper series (National Bureau of Economic Research) -- working paper no. 5709.
    ContributionsJohnston, Louis, National Bureau of Economic Research.
    Classifications
    LC ClassificationsHB1 .W654 no. 5709
    The Physical Object
    Pagination32, [4] p. :
    Number of Pages32
    ID Numbers
    Open LibraryOL22412273M

    The low rate of pass-through ensures that exchange rate shocks do not destabilize the price level. An important feature of low pass-through is that it eliminates the trade-off between output volatility and inflation volatility in the comparison of fixed relative to floating exchange rates. Keywords: Exchange rate dynamics, the law of one price Cited by: 1. In finance, an exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country's currency in relation to another currency. For example, an interbank exchange rate of Japanese yen to the United States dollar means that ¥ will be exchanged for each US$1 or that US$1 will be exchanged for each ¥ Following a positive contemporaneous productivity shock in the home country, our model performs simi-larly to other standard models in predicting a depreciation of the terms of trade and the real exchange rate. Contemporaneous shocks have two e ects on home prices. First, the wealth of the home country increases.


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Real exchange rate levels, productivity and demand shocks by Menzie David Chinn Download PDF EPUB FB2

Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries Menzie Chinn, Louis Johnston. NBER Working Paper No.

Issued in August NBER Program(s):International Finance and Macroeconomics. Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries", IMF Working Paper No 66 Article (PDF Available) June with. Louis Dorrance Johnston & Menzie David Chinn, "Real Real exchange rate levels Rate Levels, Productivity and Demand Shocks; Evidence from a Panel of 14 Countries," IMF.

Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries. Menzie Productivity and demand shocks book and Louis Johnston. NoNBER Working Papers from National Bureau of Economic Research, Inc Abstract: This paper investigates the determinants of the real exchange rate using a panel of disaggregated data for the OECD countries.

It also marries two literatures - one Cited by: Alexius () shows that between % of the volatility of the real exchange rate can be accounted for by relative productivity shocks across trading partners, thereby providing evidence that Author: Annika Alexius.

Chinn, Menzie and Louis Johnston () “Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries”, NBER Working Paper # Google Scholar Chinn, Menzie and Richard Meese () “Banking on Currency Forecasts: How Predictable Is Change productivity and demand shocks book Money?”, Journal of International Economics 38 (1–2 Cited by: Previous studies have concluded that productivity shocks have negligible effects on real exchange rate fluctuations.

This paper shows that when long-run equilibrium relationships between real exchange rate levels and fundamental variables are taken into account, relative productivity shocks account for most of the long-run movements in the real exchange by: Chinn, Menzie and Louis Johnston,“Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries,” NBER Working Paper (Cambridge, Mass.: National Bureau of Economic Research) Google ScholarCited by: the empirical estimates Real exchange rate levels the model simulation estimates.

Real exchange rates in the model are driven by an amended Balassa-Samuelson pattern of shocks to sectoral productivity and unit labor costs, and the productivity and demand shocks book estimates are extremely close to those in the Eurozone data. slides chapter 8 Nontradable Goods And The Real Exchange Rate.

larger the productivity and demand shocks book will be in the desired demand for nontradables, Open Economy Macroeconomics, Chapter 8 M. Uribe and S. Schmitt-Groh´e Adjustment of the Real Real exchange rate levels Rate to Interest-Rate Shocks Suppose that at time 0 the interest rate experiences a one-timeFile Size: KB.

Blaug,Mark, "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number Menzie Chinn & Louis Johnston, "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," NBER Working PapersNational Bureau of Economic Research, Inc.

Chinn, M. The usual suspects. Productivity and demand shocks and Asia-Pacific real exchange rates. Review of International Economics, 8, 20– Find this resource: Google Preview; WorldCat; Edison, H., & Pauls, B. A re-assessment of the relationship productivity and demand shocks book real exchange rates and real interest : Menzie D.

Chinn. The upper panel contains the VDCs of δ (r 1). The demand (preference) shock, the money multiplier shock, the monetary base productivity and demand shocks book, and — to some extent — the fiscal shock are all influential.

As indicated by the final column, monetary shocks combined account for over 40% of the variance of real exchange rate by: Real exchange rate levels, productivity and demand shocks.

Cambridge, MA: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Productivity and demand shocks book Menzie David Chinn; Louis Johnston; National Bureau of Economic Research.

Get this from a library. Real exchange rate levels, productivity and demand shocks: evidence from a panel of 14 countries. [Menzie David Chinn; Louis Johnston; National Bureau of Economic Research.] -- Abstract: This paper investigates the determinants of the real exchange rate using a panel of disaggregated data for the OECD countries.

It also marries two literatures - one which uses panel. Exogenous terms of trade shocks are found to be the most important determinant of long run movements in the real exchange rate for Denmark and Norway, while demand shocks account for most of the long run variance in the real exchange rate for Finla nd and Sweden.

Keywords: Real exchange rates; cointegration; variance decomposition. We reappraise the relationship between productivity and equilibrium real exchange rates using a panel estimation framework that incorporates a large number of countries and importantly, a dataset that allows explicit consideration of the role of non-traded, as well as traded, sector productivity shocks in exchange rate determination.

One major concern surrounding this analysis is whether the real exchange rate may be treated as an exogenous policy instrument. Country-speci–c shocks, such as productivity shocks, may impact on the real exchange rate leading to reverse causality.

The argument is well known and is made forcefully by Woodford () in his discussion of Rodrik. Increase in real exchange rate. If a countries real exchange rate is rising, it means its goods are becoming more expensive relative to its competitors.

An increase in the real exchange rate means people in a country can get more foreign goods for an equivalent amount of domestic goods. This paper examines a productivity-based explanation of the long run real exchange rate movements of six Asian economies.

Using industry level data, we construct total factor productivities (TFPs) for the tradable and nontradable sectors. We find that (a) within each country the relative price of nontradable goods is cointegrated with the sectoral TFP differential, and (b) the real exchange.

effects (the Verdoon hypothesis), or increasing returns to scale. A real exchange rate depreciation, which increases the demand for tradables, would tend to exhibit similar effects in that sector. There is an active empirical debate (see Basu and references) regarding how permanent the productivity consequences of demand shocks are.

industry levels, and foreign demand, government demand and the real effective exchange rates at the industry levels. In Section 4, using our constructed data set, we provide an overview of product dynamics and exports in Japanese manufacturing firms.

In Section 5, we present our estimates on the effects of shocks to aggregate productivity. Chinn, Menzie,“The Usual Suspects: Productivity and Demand Shocks and Asia-Pacific Real Exchange Rates,” Review of International Economics 8(1): Chinn, Menzie,“Productivity, Government Spending and the Real Exchange Rate: Evidence for OECD Countries,” in Equilibrium Exchange Rates, edited by RonaldFile Size: KB.

exchange rates, which enables us to control for country-time xed e ects, thereby eliminating spurious correlation due to aggregate shocks to the manufacturing sector.4 In this way, we can consider RER movements as shifts in the relative price of tradables that operate as demand shocks.

Kehoe () present models in which sector specific productivity shocks, real demand shocks, and changes in the trade regime cause fluctuations in the relative price of nontraded goods across countries that drive fluctuations in the real exchange rate. The Usual Suspects.

Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates Menzie D. Chinn* Abstract A productivity-based model of East Asian relative prices and real exchange rates is tested using calculated productivity levels for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and by: important driver of US real effective exchange rate fluctuations at low fre-quencies, while real demand shocks are more salient at high frequencies.

We use the spectrum at frequency zero to structurally decompose the persis-tence of the real exchange rate. Supply shocks explain more than half of the persistence of the exchange by: 1.

Nominal Shocks and Real Exchange Rate Fluctuations Luciana Juvenaly Federal Reserve Bank of St. Louis September Abstract I analyze the role of nominal and real shocks on the exchange rate behavior using a structural vector autoregressive model (sVAR) for the US vis-à-vis the rest of the world. tax rates lower the multiplier and make the economy less susceptible to shocks.

tax rates raise the multiplier and make the economy less susceptible to shocks. productivity of labor and the level of real wages. index based on the average of the real exchange rates with. EXCHANGE RATES: CONCEPTS, MEASUREMENTS AND ASSESSMENT OF COMPETITIVENESS Bangkok Novem Rajan Govil, Consultant.

This activity is supported by a grant from Japan. BANGKOK, THAILAND. NOVEMBER 24 – DECEMBER 3, The next equation reflects this concept: Here, RER, P E, and P US indicate the real exchange rate, the price of the Euro-zone’s consumption basket, and the price of the U.S.

consumption basket, respectively. Consider a numerical example for the RER. Assume that the dollar–euro exchange rate is $ per euro, P E (the price of the Euro-zone’s consumption basket) is €, and P US (the. Lecture Note on the Real Exchange Rate Barry W. Ickes Fall Introduction The real exchange rate is the critical variable (along with the rate of interest) in determining the capital account.

As we shall see, this is because the real exchange rate is the relative price of. role to demand shocks than to productivity shocks in order to match the data: demand shocks to consumption and investment account for 47% of the variance of output, the shock to the MRS for 38%, and the technology shock for a mere 15% of the variance of output.

It follows that the technology shock accounts for only a negligible share of the. The Balassa–Samuelson effect, also known as Harrod–Balassa–Samuelson effect (Kravis and Lipsey ), the Ricardo–Viner–Harrod–Balassa–Samuelson–Penn–Bhagwati effect (Samuelsonp. ), or productivity biased purchasing power parity (PPP) (Officer ) is the tendency for consumer prices to be systematically higher in more developed countries than in less developed.

Suggested Solutions to Problem Set 2 output in the Czech Republic rises due to the increase in productivity, aggregate real money demand also rises, as people have more goods and services to buy Czech Republic falls and the real exchange rate depreciates, the net effect on nominal exchange rates is ambiguous.

E = q ×PFile Size: KB. root in real exchange rates suggests that real shocks - to supply as well as to demand for national outputs such as fiscal shocks (Meltzer ()) - must play a role in understanding the behavior of real exchange rates since While the Beveridge-Nelson decompositions based upon these.

price levels. • The real dollar/euro exchange rate is the dollar price of the European basket relative to that of the American: q$/€ = (E$/€ x PE)/PUS () – Example: If the European reference commodity basket costs €, the U.S. basket costs $, and the nominal exchange rate is $ per euro, then the real dollar/euro exchange File Size: KB.

In⁄ation and real activity with –rm-level productivity shocks Michael Dotsey, Robert G. King and Alexander L. Wolmany Aug Preliminary and Incomplete Abstract Recent measurements of the extent of price stickiness indicate that prices remain –xed for a signi–cant period of time, but that there is also a substantial amount of rela.

In Figure 1, the average annual change in the real exchange rate is plotted against the average annual change in relative productivity levels for seven different countries vis-à-vis the United States, where the exchange rate is defined in terms of how many real U.S.

dollars are needed to obtain a single unit of the local currency, and. Estimating long-run equilibrium real exchange rates: short-lived shocks with long-lived impacts on Pakistan They explain that productivity shocks, terms of trade shocks, government spending, and the deviation of real exchange rate from equilibrium level was found to more than two years.

Hviding et al) employed panel data from Cited by: 1. Real country-specific productivity or demand pdf require adjustment of relative price levels between countries. If nominal prices adjusted quickly, Friedman argues, the choice of exchange-rate regime would be irrelevant because the relative price Cited by: download pdf domestic price level and the nominal exchange rate, but has no effect on domestic output.

increases domestic output and decreases the nominal exchange rate, as long as real money demand is much more responsive to real income than to the real interest rate.

but not from real shocks .demand at home but is also requires ebook nominal exchange rate ebook depreciate to adjust the terms of trade so that foreign demand rises to absorb some of the rise in home supply.

By contrast, in this model exchange rates do not need adjust to the global component in neutral policy rates, realized or expected.