Citation

Discussion Paper Details

Please find the details for DP2356 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Real Exchange Rate Volatility and Economic Openness: Theory and Evidence

Author(s): Harald Hau

Publication Date: January 2000

Keyword(s): Nontradeables, Real Effective Exchange Rates and Volatility

Programme Area(s): International Macroeconomics

Abstract: This paper relates the volatility of the (trade-weighted) effective real exchange rate to the degree of trade openness of an economy. The theoretical part presents an intertemporal monetary model with nominal labour (factor) market rigidities. Both monetary and aggregate supply shocks are shown to imply a (non-linear) inverse relationship between the import share of an economy and the volatility of its real exchange rate. Empirical evidence on a cross-section of 54 countries confirms this relationship: Difference in trade openness explain a large part of the cross-country variation in the volatility of the effective real exchange rate.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2356

Bibliographic Reference

Hau, H. 2000. 'Real Exchange Rate Volatility and Economic Openness: Theory and Evidence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2356