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Real exchange rate, productivity and labor market frictions

Sheng, Yu; Xu, Xinpeng


We extend the classic Balassa-Samuelson model to an environment with search unemployment. We show that the classic Balassa-Samuelson model with the assumption of full employment emerges as a special case of our more generalized model. In our generalized model, the degree of labor market matching efficiency affects the strength of the structural relationship between the real exchange rate and sectoral productivity through influencing labor's choice between employment and unemployment as well as...[Show more]

CollectionsANU Research Publications
Date published: 2011
Type: Journal article
Source: Journal of International Money and Finance
DOI: 10.1016/j.jimonfin.2011.01.006


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