Remoteness and real exchange rate volatility

Claudio Bravo-Ortega, Julian Di Giovanni

Research output: Contribution to journalArticlepeer-review

15 Scopus citations


This paper examines the impact of trade costs on real exchange rate volatility. The relationship is examined by constructing a two-country Ricardian model of trade, based on the work of Dornbusch, Fischer, and Samuelson (1977), which shows that higher trade costs result in a larger nontradables sector, in turn leading to higher real exchange rate volatility. We then construct a remoteness index to proxy for trade costs, and provide empirical evidence supporting the channel.

Original languageEnglish
Pages (from-to)115-132
Number of pages18
JournalIMF Staff Papers
Issue numberSPEC. ISS.
StatePublished - Sep 2006
Externally publishedYes


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