Macroeconomic Shocks, Structural Change and Real Exchange Rates: Evidence from Historical Data
40 Pages Posted: 5 Feb 2006
Date Written: September 2004
We present empirical evidence on the forces driving real exchange rates in the long run. Using data from three industrialised countries, across different exchange rate regimes, we find support for the hypothesis that productivity and fiscal shocks matter. However, in some cases fiscal shocks cause depreciations, likely triggered by the monetary accomodation of fiscal shocks. The traditional Harrod-Balassa-Samuelson effect of productivity on real exchange rates is also found to be reversed in some cases, which demonstrates the importance of the distributive sector in driving productivity gains.
JEL Classification: F31, E44, C32
Suggested Citation: Suggested Citation