「FEEL」Hong-Ghi Min, Sang-Ook Shin, Judith A. McDonald (2015), “Income Inequality and the Real Exchange Rate: linkages and Evidence”, Annals of Economics and Finance, 16-1, 115-141
▥ Lab : Financial Economics and Econometrics Lab
▥ Professor : Hong-Ghi Min
▥ Title : Income Inequality and the Real Exchange Rate: linkages and Evidence
▥ Authors : Hong-Ghi Min, Sang-Ook Shin, Judith A. McDonald
▥ Journal : Annals of Economics and Finance
▥ Publish : 2015
▥ Abstract :A simple model with non-homothetic preferences and purchasing-power parity for tradables shows that improved income inequality decreases the price of nontradables, resulting in a real depreciation. This hypothesized negative association between income inequality and the real exchange rate has robust empirical support from random- and fixed-effects models, dynamic panel estimations, and panel vector autoregressions. Thus, policies that improve a country’s income distribution, by leading to a depreciation of the real exchange rate, may improve the competitiveness of its goods. However, this income inequality-real exchange rate relationship does not imply that dramatic redistributive policies will automatically bring about a real depreciation of the domestic currency.
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