An extended NATREX model for China

You, Kefei and Sarantis, Nicholas (2008) An extended NATREX model for China. Centre for International Capital Markets discussion papers, 2008 (02). pp. 1-56. ISSN 1749-3412

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Abstract / Description

This paper extends, for the first time, Stein’s (1995a) NATREX model to China and other similar emerging market economies. We incorporate fundamentals that have not been studied by the existing literature on the NATREX model to capture the unique characteristics of the Chinese economy. Based on dynamic stability analysis, we derive the medium-run and long-run real equilibrium exchange rates and relative prices of non-tradables, and provide a detailed analysis of the effects of fundamentals. The fundamentals that affect the long-run equilibrium real exchange rate and the relative price of non-tradables include terms of trade, total and net factor productivity, rural transformation, dependency ratio, financial liberalization, relative unit labour cost, relative rate of return to capital, government investment, tax rate and the foreign real interest rate.

Item Type: Article
Uncontrolled Keywords: Centre for International Capital Markets discussion papers; CICM discussion papers; extended natural real exchange rate model; extended NATREX model; equilibrium exchange rate; relative price of non-tradables; China; dynamic stability; steady state
Subjects: 300 Social sciences > 330 Economics
Department: Guildhall School of Business and Law
Depositing User: Mary Burslem
Date Deposited: 21 Apr 2015 13:36
Last Modified: 21 Apr 2015 13:36


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