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Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan

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  • Hsiu-Ling Wu

Abstract

Three things have been suggested in this paper regarding the real exchange rate movements of the Taiwanese dollar with respect to the US dollar. First, the real exchange rates between the Taiwanese and the US dollar did not move as PPP predicts by cointegration test and impulse response function analysis. Also, through the analyses of impulse response functions, innovation in nominal exchange rate, domestic and foreign prices results in permanent changes in the real exchange rate. Finally, in the long-run, differential productivity growth between the traded and non-traded goods and the changes in relative unit labor cost can lead to the changes in the real exchange rates.

Suggested Citation

  • Hsiu-Ling Wu, 1996. "Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan," NBER Working Papers 5787, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5787
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    References listed on IDEAS

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    Cited by:

    1. Menzie D. Chinn, 2000. "The Usual Suspects? Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 20-43, February.
    2. José García Solanes & Fernando Torrejón Flores, "undated". "Testing the BalassA-Samuelson hypothesis in two different groups of countries: OECD and Latin America," Working Papers on International Economics and Finance 05-02, FEDEA.
    3. Stela Raleva, 2013. "Structural Sources and Characteristics of the Inflation in Bulgaria (1992-2010)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 41-71.
    4. Camarero, Mariam, 2008. "The real exchange rate of the dollar for a panel of OECD countries: Balassa-Samuelson or distribution sector effect?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 620-632, December.
    5. Cerveró, Susana G., 1999. "An eclectic approach to real exchange rate: Determination," Research Notes 99-6, Deutsche Bank Research.

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