Coexistence of Sustained External Imbalance and Real Exchange Rate Misalignment: The Underlying Fundamentals

By focusing on the macroeconomic effects of temporary price shocks, this note clarifies the relationships among the terms of trade, the real exchange rate and the current account. This clarification suggests that a real depreciation might prove incapable of bringing the external imbalance back to a sustainable level.

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Year of publication:	2014-08-06
Authors:	Fang, Chen ; Lee, Cheng-te
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 34.2014, 3, p. 1714-1722
Publisher:	AccessEcon
Subject:	terms of trade \| current account \| real exchange rate \| intratemporal substitutability

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Extent:	application/pdf
Type of publication:	Article
Classification:	F3 - International Finance ; F4 - Macroeconomic Aspects of International Trade and Finance
Source:	RePEc - Research Papers in Economics

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