Transfer Effect in National Price Levels |
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| Authors: | Jaewoo Lee |
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| Institution: | (1) Research Department, International Monetary Fund, 700 19th St. N.W., 20431 Washington, D.C., USA |
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| Abstract: | A model of national price levels is developed to lay bare implicit assumptions behind the conventional view on the effect
of productivity differentials and net foreign assets. The effect of productivity on national price levels is determined by
the interaction of several countervailing channels, implying that the net effect can go in either direction for reasonable
parameter values. By comparison, net foreign assets have a more robust effect on national price levels than productivity differentials.
Basic theoretical implications are confirmed by the price level data of OECD countries.
JEL no. C82, F31, F41 |
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| Keywords: | Price levels productivity net foreign assets |
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