Endogenous trade, nontraded goods and real exchange rate variations

Arbeitspapier

This paper evaluates whether a macroeconomic trade model, where the decision of trade and the Balassa-Samuelson effect are endogenous, can explain recent empirical facts about the importance of nontraded goods prices in real exchange rate variations better than a standard Balassa- Samuelson model, where nontraded goods are exogenously determined. The model is modified and calibrated to an asymmetric equilibrium that allows the steady state of the model to match some of the US-Mexico relationships quite well. The results suggest an importance of nontraded goods in real exchange rate volatility closer to the empirical evidence. In addition, the model replicates the findings that nontraded prices exhibit higher volatility than the real exchange rate and that these prices are negatively correlated with traded goods prices.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2015-07

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Foreign Exchange ; Open Economy Macroeconomics
• Subject: Real Exchange Rate ; Endogenous Trade ; Firm Heterogeneity ; Firm Dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hernández, Marco A.
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/129957
• Last update: 10.03.2025, 11:43 AM CET