Roads and the Real Exchange Rate

52 Pages Posted: 8 Aug 2018 Last revised: 12 Aug 2022

Multiple version iconThere are 2 versions of this paper

Date Written: July 20, 2018

Abstract

This working paper was written by Qingyuan Du (Monash University), Shang-Jin Wei (Columbia University) and Peichu Xie (Peking University).

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.

JEL Classification: F3, F31, F41

Suggested Citation

Submitter, Hong Kong Institute for Monetary and Financial Research, Roads and the Real Exchange Rate (July 20, 2018). Columbia Business School Research Paper No. 18-61, Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 16/2018, Available at SSRN: https://ssrn.com/abstract=3216980 or http://dx.doi.org/10.2139/ssrn.3216980

Hong Kong Institute for Monetary and Financial Research Submitter (Contact Author)

Hong Kong Institute for Monetary and Financial Research ( email )

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