Correcting Real Exchange Rate Misalignment

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Correcting Real Exchange Rate Misalignment

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Author : Maya Eden
language : en
Publisher:
Release Date : 2017

Correcting Real Exchange Rate Misalignment written by Maya Eden and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

This paper studies the issue of real exchange rate misalignment and the difficulties in settling international real exchange rate disputes. The authors show theoretically that determining when a country should be sanctioned for real exchange rate "manipulations" is difficult: in some situations a country's real exchange rate targeting can be beneficial to other countries, while in others it is not. Regardless, it is difficult to establish whether a misaligned real exchange rate is intentionally manipulated rather than unintentionally caused by other policies or by various distortions in the economy. The paper continues by illustrating the difficulty in measuring real exchange rate misalignment, and provides a critical assessment of existing methodologies. It concludes by proposing a new method for measuring real exchange rate misalignment based on differences in marginal products between producers of tradable and non-tradable goods.

Correcting Real Exchange Rate Misalignment

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Author : Ha Nguyen
language : en
Publisher:
Release Date : 2012

Correcting Real Exchange Rate Misalignment written by Ha Nguyen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.

Misalignment Of Exchange Rates

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Author : Richard C. Marston
language : en
Publisher: University of Chicago Press
Release Date : 2008-04-15

Misalignment Of Exchange Rates written by Richard C. Marston and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-04-15 with Business & Economics categories.

Economists writing on flexible exchange rates in the 1960s foresaw neither the magnitude nor the persistence of the changes in real exchange rates that have occurred in the last fifteen years. Unexpectedly large movements in relative prices have lead to sharp changes in exports and imports, disrupting normal trading relations and causing shifts in employment and output. Many of the largest changes are not equilibrium adjustments to real disturbances but represent instead sustained departures from long-run equilibrium levels, with real exchange rates remaining "misaligned" for years at a time. Contributors to Misalignment of Exchange Rates address a series of questions about misalignment. Several papers investigate the causes of misalignment and the extent to which observed movements in real exchange rates can be attributed to misalignment. These studies are conducted both empirically, through the experiences of the United States, Great Britain, Japan, and the countries of the European Monetary System, and theoretically, through models of imperfect competition. Attention is then turned to the effects of misalignment, especially on employment and production, and to detailed estimates of the effects of changes in exchange rates on several industries, including the U.S. auto industry. In response to the contention that there is significant "hysteresis" in the adjustment of employment and production to changes in exchange rates, contributors also attempt to determine whether the effects of misalignment can be reversed once exchange rates return to earlier levels. Finally, the issue of how to avoid—or at least control—misalignment through macroeconomic policy is confronted.

Exchange Rate Misalignment In Developing Countries

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Author : Sebastian Edwards
language : en
Publisher: Johns Hopkins University Press
Release Date : 1988

Exchange Rate Misalignment In Developing Countries written by Sebastian Edwards and has been published by Johns Hopkins University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Business & Economics categories.

This article analyzes the theory of equilibrium real exchange rates and defines misalignment as a deviation of the real exchange rate (RER) from its equilibrium level. The role of macroeconomic policies is then analyzed under three alternative nominal exchange rate regimes: predetermined nominal exchange rates; floating nominal rates; and dual or black market nominal exchange rates. This discussion points out how inconsistent macroeconomic policies often lead to real exchange rate misalignment. Corrective measures, including nominal devaluation and several alternative approaches, are then evaluated.

Exchange Rate Misalignment

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Author : Lawrence E. Hinkle
language : en
Publisher: World Bank Publications
Release Date : 1999

Exchange Rate Misalignment written by Lawrence E. Hinkle and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Business & Economics categories.

The study cautiously identifies exchange rate misalignment as an important element in most of the exchange rate crises that plagued the developing world during the last decade. Given that the increasing integration of world capital markets, has escalated the costs of such crises, a broad consensus emerged in recent years, that the overriding objective of exchange rate policy in developing countries, should be to avoid episodes of prolonged, and substantial misalignment, i.e., situations in which the actual real exchange rate differs significantly from its long-run equilibrium value. It was the Bank's involvement in one such misalignment episode, that eventually led to this book. Following an overview on the concepts and measurement of exchange rate misalignment, its impact on the purchasing power parity, and the relationship between the external real exchange rate (RER), and the two-good internal RER for tradables non-tradables, the study presents methodologies - empirical applications - for estimating the RER equilibrium. The study reaches an optimistic conclusion - that enough is known to identify cases of misalignment, and be able to sound clear warning signals. The implication for exchange rate policy is that ignorance about the empirical value of the equilibrium exchange rate, cannot be used to clinch arguments for extreme exchange arrangements, such as clean floats, currency boards, and "dollarization."

Estimating The Half Life Of Theoretically Founded Real Exchange Rate Misalignments

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Author : Megumi Kubota
language : en
Publisher:
Release Date : 2017

Estimating The Half Life Of Theoretically Founded Real Exchange Rate Misalignments written by Megumi Kubota and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

This paper models empirically the short and long-term behavior of the real exchange rate misalignment -- a key variable in academic and policy circles. The equilibrium real exchange rate is derived from a theoretical model with intertemporal external equilibrium and internal equilibrium (in traded and non-traded markets) based on the current account dynamics and Harrod-Balassa-Samuelson productivity, respectively. This provides a bridge between theory and empirics that links the real exchange rate and its fundamentals (terms of trade, the ratio of net foreign assets to gross domestic product, and productivity differentials). The paper contributes to the literature by: (a) estimating an unrestricted vector error correction model that examines the short-term dynamics of real exchange rate misalignments and links these deviations with shocks to fundamentals from 1970 to 2010, and (b) computing the speed of reversion of real exchange rate misalignments with respect to a fundamentals-based equilibrium level. The paper reconciles two strands of the empirical literature that estimate the half-life of purchasing power parity deviations: one, the linear adjustment model that renders the consensus half-life estimates of purchasing power parity deviations, and another, the non-linear adjustment model of purchasing power parity deviations. The model estimates the half-life of real exchange rate deviations from their fundamental equilibrium at approximately 2.8 years. Consequently, about 25 percent of the real exchange rate deviation from its equilibrium level is corrected in the next year. Approximately 43 percent of the countries in the sample have a half-life of real exchange rate deviations from equilibrium less than 2.5 years -- which is consistent with predictions from non-linear mean reversion models.

The Equilibrium Real Exchange Rate Of The Malagasy Franc

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Author : Mr.John Cady
language : en
Publisher: International Monetary Fund
Release Date : 2003-02-01

The Equilibrium Real Exchange Rate Of The Malagasy Franc written by Mr.John Cady and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-02-01 with Business & Economics categories.

Employing cointegration techniques, the long-run determinants of Madagascar's real exchange rate are examined from a stock-flow perspective. The long-run behavior of the real effective exchange rate is explained by the net foreign asset position and factors affecting trade flows. An index of the long-run equilibrium real exchange rate is developed to assess the degree of misalignment. The general conclusions are that the Malagasy franc has experienced significant misalignment in the past, but that the recent appreciation of the real effective exchange rate is consistent with changes in the fundamentals, particularly anticipated improvements in the net foreign assets position stemming from Madagascar's eligibility for assistance under the enhanced HIPC Initiative.

Real Exchange Rate Misalignment

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Author :
language : en
Publisher:
Release Date : 2005

Real Exchange Rate Misalignment written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

Real Exchange Rate Misalignment In Developing Countries Under The Floating Exchange Rate Regime

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Author : Gae-Iyong Choi
language : en
Publisher:
Release Date : 1996

Real Exchange Rate Misalignment In Developing Countries Under The Floating Exchange Rate Regime written by Gae-Iyong Choi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with categories.

Capital Flows And Long Term Equilibrium Real Exchange Rates In Chile

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Author : Ibrahim Elbadawi
language : en
Publisher: World Bank Publications
Release Date : 1994

Capital Flows And Long Term Equilibrium Real Exchange Rates In Chile written by Ibrahim Elbadawi and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Capital movements categories.