Dynamic Tradable Sectors, Productivity heterogeneity and RMB appreciation—Evidence from revised Balassa-Samuelson Model
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| Title | Dynamic Tradable Sectors, Productivity heterogeneity and RMB appreciation—Evidence from revised Balassa-Samuelson Model
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| Author | Zhang Xiaoli |
| Organization | Shanghai Institute of Foreign Trade |
| Email | zxl-mailbox@163.com |
| Key Words | TFP; Terms of Trade; Real Exchange Rate; Balassa-Samuelson effect |
| Abstract | this paper examines the impact of productivity heterogeneity on RMB real exchange rate based on Balassa-Samuelson model with revision of endogenous number of firms. Using numerical simulation, we find the impact of productivity on RMB exchange rate is in line with classical Balassa-Samuelson model under different elasticity of substitution between products made in home and foreign. The relative increasing of productivity in tradable sectors cause RMB appreciation, but the term of trade plays a import role in the transition process. Considering the endogenous number of firms, we use firm-level data to estimate TFP and apply “dynamic tradable sectors” to classify those firms, details appreciation of RMB has been classified by applying panel fixed effects estimation. |
| Serial Number | WP392 |
| Time | 2012-12-07 |
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