Real Exchange Rates in Growing Economies: How Strong is the Role of the Nontradables Sector?

35 Pages Posted: 3 Mar 2006

See all articles by Ken Miyajima

Ken Miyajima

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: December 2005

Abstract

This paper emphasizes the importance of total factor productivity (TFP) developments in the nontradables sector to quantitatively demonstrate that the time-honored Balassa-Samuelson hypothesis does not generally apply to episodes of economic growth. Though the Balassa-Samuelson hypothesis postulates that strong economic growth should, in general, be accompanied by a real appreciation in exchange rates, this paper does not find such systematic links. This is because some growth spurts are marked by equal TFP gains in both the tradables and nontradables sectors, and others by larger TFP gains in the nontradables sector.

Keywords: growth accounting, nontradables sector, productivity, real exchange rates

JEL Classification: C22, F31, O24, O47

Suggested Citation

Miyajima, Ken, Real Exchange Rates in Growing Economies: How Strong is the Role of the Nontradables Sector? (December 2005). IMF Working Paper No. 05/233, Available at SSRN: https://ssrn.com/abstract=888102

Ken Miyajima (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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