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dc.contributor.authorCORSETTI, Giancarlo
dc.contributor.authorDEDOLA, Luca
dc.contributor.authorLEDUC, Sylvain
dc.date.accessioned2007-02-02T15:16:43Z
dc.date.available2007-02-02T15:16:43Z
dc.date.issued2006
dc.identifier.issn1725-6704
dc.identifier.urihttps://hdl.handle.net/1814/6684
dc.description.abstractThis paper investigates the international transmission of productivity shocks in a sample of ve G7 countries. For each country, using long-run restrictions, we identify shocks that increase permanently domestic labor productivity in manufacturing (our measure of tradables) relative to an aggregate of other industrial countries including the rest of the G7. We find that, consistent with standard theory, these shocks raise relative consumption, deteriorate net exports, and raise the relative price of nontradables -in full accord with the Harrod-Balassa-Samuelson hypothesis. Moreover, the deterioration of the external account is fairly persistent, especially for the US. The response of the real exchange rate and (our proxy for) the terms of trade differs across countries: while both relative prices depreciate in Italy and the UK (smaller and more open economies), they appreciate in the US and Japan (the largest and least open economies in our sample); results are however inconclusive for Germany. These findings question a common view in the literature, that a country's terms of trade fall when its output grows, thus providing a mech- anism to contain differences in national wealth when productivity levels do not converge. They enhance our understanding of important episodes such as the strong real appreciation of the dollar as the US productivity growth accelerated in the second half of the 1990s. They also provide an empirical contribution to the current debate on the adjustment of the US current ac- count position. Contrary to widespread presumptions, productivity growth in the US tradable sector does not necessarily improve the US trade deficit, nor deteriorate the US terms of trade, at least in the short and medium run.en
dc.format.extent1269789 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2006/39en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectF32en
dc.subjectF41en
dc.subjectF42en
dc.subjectInternational transmission mechanismen
dc.subjectnet exportsen
dc.subjectterms of tradeen
dc.subjectreal exchange ratesen
dc.subjectVARen
dc.subjectlong-run restrictionsen
dc.subjectUS current accounten
dc.titleProductivity, External Balance and Exchange Rates: Evidence on the Transmission Mechanism among G7 Countriesen
dc.typeWorking Paperen
dc.neeo.contributorCORSETTI|Giancarlo|aut|EUI70002
dc.neeo.contributorDEDOLA|Luca|aut|
dc.neeo.contributorLEDUC|Sylvain|aut|
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