Exercise 8.4

The Real Exchange Rate and The Price of Nontradables in the MXN Model

Problem

Show that in the MXN model there is a one-to-one negative relationship between \(RER_t\) and \(p^n_t\). Demonstrate that this negative relationship holds for any positive value of the intratemporal elasticity of substitution between tradables and nontradables, \(\mu_{\tau n}\).

Answer

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---
title: "Exercise 8.4"
subtitle: "The Real Exchange Rate and The Price of Nontradables in the MXN Model"
---
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## Problem

Show that in the MXN model there is a one-to-one negative relationship between $RER_t$ and $p^n_t$. Demonstrate that this negative relationship holds for any  positive value of the intratemporal elasticity of substitution between tradables and nontradables, $\mu_{\tau n}$.  

## Answer

_No solution has been posted yet. If you have a solution, we invite you to share it in the comment box at the bottom of this page._