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The relative price of tradables and nontradables and the U.S. trade balance

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  • Joachim Zietz

Abstract

The real exchange rate is defined as the relative price of nontradables and tradables. An index of the relative price is constructed for the U.S. and used to explain net exports. The index appears to perform better in explaining net exports than a comparable purchasing power parity real exchange rate. The relative price of nontradables, in turn, is shown to be cointegrated with a set of variables that drive the demand for and supply of nontradables. These variables capture long-run structural and demographic changes of the U.S. economy, such as the increased demand for medical services. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Joachim Zietz, 1996. "The relative price of tradables and nontradables and the U.S. trade balance," Open Economies Review, Springer, vol. 7(2), pages 147-160, April.
    • Handle: RePEc:kap:openec:v:7:y:1996:i:2:p:147-160
    DOI: 10.1007/BF01891901
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    References listed on IDEAS

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    Cited by:

    1. Mary Tian, 2015. "Tradability of Output, Business Cycles, and Asset Prices," Finance and Economics Discussion Series 2015-3, Board of Governors of the Federal Reserve System (U.S.).
    2. Tian, Mary, 2018. "Tradability of output, business cycles and asset prices," Journal of Financial Economics, Elsevier, vol. 128(1), pages 86-102.
    3. Zietz, Joachim A. & Penn, David A., 2008. "An Unobserved Components Forecasting Model of Non-Farm Employment for the Nashville MSA," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1), pages 1-10.
    4. Hong-Ghi Min & Sang-Ook Shin & Judith A. McDonald, 2015. "Income Inequality and the Real Exchange Rate: Linkages and Evidence," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 115-141, May.

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