Economics, Econometrics and Finance
4 years ago

Terms of trade drive real exchange rates in small developed economies.

RePEc: Research Papers in Economics
The Real Exchange Rate in Small Open Developed Economies: Evidence from Cointegration Analysis
Debabrata Bagchi, Georgios Chortareas, Stephen M. Miller

Paper Summary

The article explores how changes in trade terms and interest rates affect the value of money in small developed countries. By analyzing long-term connections, the researchers found that trade terms have a more consistent impact on the value of money compared to interest rates. Additionally, adjustments in interest rates happen faster than changes in trade terms.

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