## Terms of trade and real exchange rate

The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, 31 Jul 2006 The contributions of terms-of-trade disturbances to the actual fluctuation of real GDP, real exchange rates, and prices are also examined. 7 Apr 2010 Key words: Real exchange rate, Trade balance, Cointegration test, model, Granger Causality, . 1. Introduction. The effectiveness of different In this case, import is likely because foreign goods are cheaper, in real terms, than domestic goods. Thus, when the real exchange rate is high, net exports This paper develops a general equilibrium model of the real exchange rate (RER ) for The appreciating effect of higher terms of trade on the RER is a standard

## also provides the nominal exchange rate, a real exchange rate series based on trade weighted CPI's, and an index of the world price level based on the implicit GDP deflator of industrial countries.

The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, 31 Jul 2006 The contributions of terms-of-trade disturbances to the actual fluctuation of real GDP, real exchange rates, and prices are also examined. 7 Apr 2010 Key words: Real exchange rate, Trade balance, Cointegration test, model, Granger Causality, . 1. Introduction. The effectiveness of different In this case, import is likely because foreign goods are cheaper, in real terms, than domestic goods. Thus, when the real exchange rate is high, net exports This paper develops a general equilibrium model of the real exchange rate (RER ) for The appreciating effect of higher terms of trade on the RER is a standard

### The real effective exchange rate measures the value of a currency against a basket of other currencies; it takes into account changes in relative prices and shows what can actually be bought. Sterling effective exchange rate index.

Using recently developed econometric methods for nondashstationary data we find that the real exchange rate is cointegrated with terms-of-trade variables, and To this end, we estimate a long term relationship between the real effective exchange rate and economic fundamentals, including the commodity terms of trade.

### This paper develops a general equilibrium model of the real exchange rate (RER ) for The appreciating effect of higher terms of trade on the RER is a standard

31 Jul 2006 The contributions of terms-of-trade disturbances to the actual fluctuation of real GDP, real exchange rates, and prices are also examined. 7 Apr 2010 Key words: Real exchange rate, Trade balance, Cointegration test, model, Granger Causality, . 1. Introduction. The effectiveness of different In this case, import is likely because foreign goods are cheaper, in real terms, than domestic goods. Thus, when the real exchange rate is high, net exports This paper develops a general equilibrium model of the real exchange rate (RER ) for The appreciating effect of higher terms of trade on the RER is a standard 2.2 Real exchange rate and trade performance in Sweden findings are reasonably robust in terms of measures of exchange-rate volatility, different estimation. Keywords: exchange rate; international trade; tariffs, IMF, WTO. Under this model, the real exchange rate is also function of terms of trade, net external position

## The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies. The weights are determined by comparing the relative trade balance of a country's currency against each country within the index.

Real effective exchange rate is used to reflect overall performance of Vietnam's currency. The results suggest that in short-term, exchange rate has very limited To perform our task we collected information on exchange rates, output, terms of trade, government spending, monetary aggregates, exchange rate regimes, trade Key words: Export diversification, real exchange rate, emerging Asia and Latin America, volatile and adverse terms of trade shocks, rendering free trade less The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, 31 Jul 2006 The contributions of terms-of-trade disturbances to the actual fluctuation of real GDP, real exchange rates, and prices are also examined.

A model of the terms of trade and the equilibrium exchange rate In the tradition of small open-economy models, the terms of trade are exogenous variables that play a key role in determining not only the exchange rate, but the whole distribution of resources and activity through the economy.1 However, it is important to note that economic theory cannot unambiguously specify the effect of a terms-of-trade movement on the real exchange rate. Mathematically, the real exchange rate is equal to the nominal exchange rate times the domestic price of the item divided by the foreign price of the item. When working through the units, it becomes clear that this calculation results in units of foreign good per unit of domestic good. Some recent papers evidence the link between the real effective exchange rate (REER) and commodity terms of trade. The long run elasticity between the two variables is generally found around 0.5, which means that a 10% rise in the commodity terms of trade implies a 5% appreciation of the REER in the long run. The real effective exchange rate measures the value of a currency against a basket of other currencies; it takes into account changes in relative prices and shows what can actually be bought. Sterling effective exchange rate index.