The large and persistent deviations of nominal exchange rates from their purchasing power parities comprise a key stylized fact in international economics. This paper sheds light on these persistent deviations by combining two disparate strands of empirical work. The first strand focuses on real...

We estimate the long-run Japanese money demand function in a cointegration framework with two nonlinear functional forms that allow for the liquidity trap, and compare the results with the standard log-level functional form. In addition to the conventional linear cointegration techniques, we...

This paper examines a productivity-based explanation of the long run real exchange rate movements of six Asian economies. Using industry level data, we construct total factor productivities (TFPs) for the tradable and nontradable sectors. We find that (a) within each country the relative price...

A large body of theoretical and empirical works asserts that exchange rates depend upon a country's productivity growth, and this effect is dubbed the Balassa-Samuelson effect. This paper examines the evidence for a Balassa-Samuelson based explanation for the real exchange rate movements of...

This paper examines the relationship between the relative price of nontraded goods and sectoral total factor productivities (TFPs) in the context of the Balassa-Samuelson model. With perfect capital mobility internationally and perfect factor mobility domestically, the relative price of...