where p denotes the log of the consumer price index (CPI), pT and pNT are the logs of the
prices of tradable and non-tradable goods, θ is the constant weight of the prices of tradable
and non-tradable goods in the CPI (0 < θ < 1), and Δ is the first difference operator.
For a small, price-taking economy, the rate of change in the price of tradable goods is