We develop a general equilibrium model of an emerging market economy where productivity growth differentials between tradable and non-tradable sectors result in an equilibrium appreciation of the real exchange rate - the so-called Balassa-Samuelson effect. The paper explores the dynamic...

We use detailed data for Iceland to examine two often-neglected aspects of the "exchange rate pass-through" problem. First, we investigate whether the pass-through coefficient varies with the degree of "international tradability" of goods. Second, we analyze if the pass-through coefficient...