International Trade and Factor Productivity as
Determinants of the Real Effective Exchange
Marcelo Dabós and Ernesto Gantman
CENTRUM Católica’s Working Paper No. 2016-06-0028
Using large panel data models that deal with the problems of potential endogeneity and cross-sectional dependence, while also allowing for cross-country heterogeneity in the parameters of interest, we demonstrated that trade openness produces a depreciation of the real effective exchange rate and total factor productivity leads to its appreciation.