Determinants of the equilibrium real exchange rate
|Title:||Determinants of the equilibrium real exchange rate||Authors:||Neary, J. Peter||Permanent link:||http://hdl.handle.net/10197/1434||Date:||Apr-1987||Abstract:||This note presents a compact derivation of the determinants of changes in the equilibrium real exchange rate (the inverse of the price index of nontraded goods relative to traded goods), in a small open economy with any number of goods and factors. It is shown that the change in the real exchange rate equals a simple weighted sum of the differences between marginal propensities to consume and to produce individual nontraded goods. Implications of the result are noted for a variety of applied questions, including the effects of foreign aid, the "Dutch disease" and purchasing power parity comparisions between countries.||Type of material:||Working Paper||Publisher:||University College Dublin. School of Economics||Subject LCSH:||Equilibrium (Economics)
States, Small--Economic conditions
|Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Economics Working Papers & Policy Papers|
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