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An Extended NATREX Model for China

An Extended NATREX Model for China

You, Kefei ORCID: 0000-0001-7253-5838 and Sarantis, Nicholas (2008) An Extended NATREX Model for China. [Working Paper] (Unpublished)

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Abstract

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: Working Paper
Uncontrolled Keywords: Extended NATREX model; Equilibrium exchange rate; Relative price of non-tradables; China; Dynamic stability; Steady state
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 27 Feb 2019 16:01
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/21404

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