Oil, productivity, government spending and the real yen-dollar exchange rate (Pacific Basin working paper series)
by Kenneth S. Rogoff
Category: Foreign exchange

"This paper develops an empirical model of the relative price of non-traded goods which sharply contrasts with the standard Balassa-Samuelson framework. Unanticipated productivity shocks, whether temporary or permanent, induce long-lasting changes in the real exchange. The model is implemented for the yen-dollar exchange rate. Unanticipated oil price increases tend to cause a depreciation of the yen, although the effect is weaker in the later part of the sample."--Page [i].