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

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  • Robert Dekle

    (University of Southern California (Email: dekle@usc.edu))

Abstract

We tackle the important issue of what the appropriate trends in the real Yen-Dollar andRMB-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 theone 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.

Suggested Citation

  • Robert Dekle, 2013. "Real Exchange Rates in a Model of Structural Change: Applications to the Real Yen-Dollar and Chinese RMB-Dollar Exchange Rates," IMES Discussion Paper Series 13-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:13-e-02
    as

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    File URL: http://www.imes.boj.or.jp/research/papers/english/13-E-02.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    equilibrium real exchange rates; Balassa-Samuelson effect; structural transformation; sectoral change; productivity;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance

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