However, according to the Balassa-Samuelson' effect, the productivity of tradable goods also influenced the movement of RER (Duval, 2002, p384). ... Based on the data provided, "only a small part of the trend appreciation of the yen/dollar RER can be related to the relative price of non tradables"(Duval, 2002, 385). ... Therefore, it was noted that PPP is not valid to ERER in the medium/long run (Duval, 2002). ... Basically, these models identify RER determinants, based on the equilibrium condition as followed: CA(ERER)+I-S=0 (Duval, 2002,p390) Where CA is the current account, I is invest...

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• Grade Level: Undergraduate