The Portuguese real exchange rate, 1995-2010 : competitiveness or price effects?

• Autor(a) principal: Freitas, Miguel Lebre de
• Data de Publicação: 2014
• Outros Autores: Castro, Miguel de Faria e
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/1822/30200
• topic: Real exchange rate; FERER; Unit labor costs; Ciências Sociais::Economia e Gestão

We disentangle the extent to which the real exchange rate appreciation in Por- tugal during 1995-2010 re ected the emergence of wage-productivity misalignments or, instead, changes in the relative price of tradable and non-tradable goods. The available data suggests that the latter e ect dominated at the aggregate level. The evidence is consistent with the view that the external imbalance that character- ized the Portuguese economy during the 1990s and early 2000s was triggered by the liberalization of capital ows, and not by dysfunctional wage setting institu- tions. Using the Fundamental Equilibrium Exchange Rate approach, we nd that recent oil price shocks played an important role in explaining the real exchange rate overvaluation in Portugal.