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- Title
Non-Traded Goods and Real Exchange Rate Fluctuations: A Structural VAR Analysis.
- Authors
Azcona, Nestor
- Abstract
Real exchange rate variance decompositions indicate that only a small fraction of real exchange rate movements can be attributed to changes in the relative price between traded and non-traded goods. This paper argues that those exercises, by ignoring the nature of the shocks behind real exchange rate changes, may be inadequate to measure the relative importance of non-traded goods prices. Instead, it proposes using a structural vector autoregression (SVAR) model to study the effects of shocks to the relative supply and relative demand for non-traded goods on the real exchange rate. The SVAR model is identified via long-run restrictions and is estimated for a group of advanced economies. The results indicate that for some countries, relative supply shocks can be a significant source of real exchange rate fluctuations.
- Subjects
NONTRADED goods; FOREIGN exchange rates; AUTOREGRESSION (Statistics); RATE of return; PORTFOLIO diversification
- Publication
International Advances in Economic Research, 2017, Vol 23, Issue 2, p137
- ISSN
1083-0898
- Publication type
Article
- DOI
10.1007/s11294-017-9635-y