True protection and the real exchange rate in a capital-rich developing country: some evidence for Saudi Arabia |
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| Authors: | Chris Milner John Presley Tony Westaway |
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| Institution: | 1. Department of Economics , University of Nottingham , University Park, Nottingham , NG7 2RD , UK;2. Loughborough University , UK |
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| Abstract: | This paper investigates how alternative measures of the real exchange rate respond to trade policy and terms of trade changes. It employs a modelling framework which endogenises the price of non-tradeable goods, and applies the model to price and real exchange rate data for Saudi Arabia for the period 1982–92. The results show that the popular propositions about the response of the real exchange rate to terms of trade or trade policy changes do not necessary hold. This is a consequence of the measure of the real exchange rate utilized, rather than a product of Saudi Arabia's capital richness. |
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