Real Exchange Rates in a Model of Structural Change: Applications to the Real Yen-Dollar and Chinese RMB-Dollar Exchange Rates

Dekle, Robert

We tackle the important issue of what the appropriate trends in the real Yen-Dollar and RMB-Dollar are over time. Over the long-run, the real yen has been
appreciating against the U.S. dollar; while the real RMB-dollar rate has been
depreciating (until 1999). In this paper, we build a macroeconomic-trade model of Japan-U.S. trade on the one hand, and China-U.S. trade on the other. Our model is essentially a general equilibrium extension of the Balassa-Samuelson effect. We show that these long-run trends in the real yen-dollar and RMB-dollar rates in the data can be justified by our model.


More About This Work

Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 321
Published Here
July 24, 2013