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dc.contributor.authorChristopoulos, Dimitris K.en_US
dc.contributor.authorGente, Karineen_US
dc.contributor.authorLeón-Ledesma, Miguel A.en_US
dc.description.abstractEmpirical evidence suggests that real exchange rates (RER) behave differently in developed and developing countries. We develop an overlapping generations two-sector exogenous growth model in which RER determination may depend on the country's capacity to borrow from international capital markets. The country faces a constraint on capital in ows. With high domestic savings, the RER only depends on productivity spread between sectors (Balassa-Samuelson effect). If the constraint is too tight and/or domestic savings too low, the RER depends on both net foreign assets (transfer effect) and productivity. We then analyze the empirical implications of the model and find that, in accordance with the theory, the RER is mainly driven by productivity and net foreign assets in constrained countries and by productivity in unconstrained countries.en_US
dc.publisher|aUniv. of Kent, School of Economics |cCanterburyen_US
dc.relation.ispartofseries|aSchool of Economics discussion papers |x10,11en_US
dc.subject.keywordreal exchange rateen_US
dc.subject.keywordcapital in ows constrainten_US
dc.subject.keywordoverlapping generationsen_US
dc.titleNet foreign assets, productivity and real exchange rates in constrained economiesen_US
dc.typeWorking Paperen_US

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