Accounting for Real Exchange Rate Changes-Extending the Methodology
نویسندگان
چکیده
The seminal work of Engel (1999) establishes a method for measuring the contributions of traded goods and nontraded goods to the fluctuation of real exchange rates. Two difficulties arise: the assumed price aggregation is likely biased, and the needed data on non-traded goods price is often limited. The present work overcomes these difficulties, as follows. First we generalize Engel’s exchange rate decomposition to a broader class of price indices, and then we show that data on non-traded prices can be avoided altogether, regardless of which price index is used. JEL Classification: F3, F4
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