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What Explains India’s Real Appreciation?, Renu Kohli, Sudip Mohapatra

We examine the evolution of nontradable and tradable prices in the Indian economy over 1980-2002 and find widening differentials: the real exchange rate has been appreciating. This might seem unsurprising, since India's rapid per capita income growth suggests Balassa-Samuelson factors at play. However, after 1990, the tradable-nontradable labor productivity gap, the driver of real appreciation according to Balassa-Samuelson, virtually disappeared. So what explains the real appreciation? Assessing the role of both demand and supply factors, we find that demand pressures arising from higher income growth accounted for much of the relative price increase during the post-reform period. Falling import prices also contributed significantly, along with an increase in government spending
Table Of Contents
Contents; I. Introduction; II. What Explains the Increase in Relative Price of Nontradables--Theory; III A First Look at the Evidence; Figures; 1. Exports/Value of Total Production, 1980-2002; Boxes; 1. Implicit Price Series; A. Rising relative Nontradable Prices; 2. Nontradables-Tradables Inflation Differential; Tables; 1. Tradable-Nontradable Classification by Exports/Production Ratio; B. Relative Nontradable Prices and Other Measures of the Real Exchange Rate; 3. Nontradable/Tradable Price Ratio and the Real Effective Exchange Rate
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (52 p.)
Specific Material Designation
Form Of Item

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