A prespective on real exchange rate determination in Italy during the convergence process towards the EMU: The traded non-traded model

Roberta De Santis, ISAE, Rome Italy

Abstract

This paper attempts to provide a perspective on real exchange rate determination in Italy during the convergence process towards the EMU. It focuses on some structural determinants of real exchange rates such as the behaviour of traded non traded prices, Government expenditure and interest rates differentials.

This paper investigates whether, the traded non traded model can be used to provide a measure of the deviation from equilibrium of the Italian Lira ECU real exchange rate.