Professor Naknoi’s paper titled “Real Exchange Rate Fluctuations, Wage Stickiness and Tradability” has been accepted for publication in the Canadian Journal of Economics.

Her study demonstrates that when factors of production is classified by their tradability, the relative wage of nontraded labor influences the real exchange rate through the relative cost of distribution services. She employs monthly data on the sector-level U.S.-Canada real exchange rate and the relative wage of service-producing labor. The relative wage accounts for 40% of the variability of the real exchange rate at a one-month horizon.

Furthermore, she constructs a measure of effective nontraded labor content to classify goods into nontraded and traded ones, and shows that the variability of the price of the nontraded-goods basket accounts for more than half of the variability of the real exchange rate.

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