Roads and the Real Exchange Rate

68 Pages Posted: 10 Aug 2013 Last revised: 19 Mar 2022

See all articles by Qingyuang Du

Qingyuang Du

Monash University

Shang-Jin Wei

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Peichu Xie

Peking University

Multiple version iconThere are 2 versions of this paper

Date Written: August 2013

Abstract

This paper studies the effect of transport infrastructure on the real exchange rate (RER) and reaches two relatively strong conclusions. First, while the list of robust determinants of the RER is not long, transport infrastructure belongs to that list. Many other potential determinants proposed in the literature, such as net foreign asset position or terms of trade, turn out to be not robust. Second, in terms of economic significance, the infrastructure effect follows closely the well-known Balassa-Samuelson effect and is one of the most important explanatory variables for RER movements, especially in developing countries.

Suggested Citation

Du, Qingyuang and Wei, Shang-Jin and Xie, Peichu, Roads and the Real Exchange Rate (August 2013). NBER Working Paper No. w19291, Available at SSRN: https://ssrn.com/abstract=2308260

Qingyuang Du (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Shang-Jin Wei

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Peichu Xie

Peking University ( email )

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