Download or read book Misalignment of Exchange Rates written by Richard C. Marston and published by University of Chicago Press. This book was released on 2008-04-15 with total page 332 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Correcting Real Exchange Rate Misalignment written by Maya Eden and published by . This book was released on 2017 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Correcting Real Exchange Rate Misalignment written by Ha Nguyen and published by . This book was released on 2012 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Exchange Rate Misalignment in Developing Countries written by Sebastian Edwards and published by Johns Hopkins University Press. This book was released on 1988 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Estimating the Half Life of Theoretically Founded Real Exchange Rate Misalignments written by Megumi Kubota and published by . This book was released on 2017 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Real Exchange Rate Misalignment written by and published by . This book was released on 2005 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Exchange Rate Misalignments and Growth written by Ofair Razin and published by . This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real exchange rate (RER) misalignment is now a standard concept in international macroeconomic theory and policy. However, there is neither a consensus indicator of misalignment, nor an agreed upon methodology for constructing such an indicator. This paper constructs an indicator of RER misalignment for a large sample of developed and developing countries. This indicator is based on a well-structured but simple extension of an IS-LM model of an open economy. The paper then uses regression analysis to explore whether RER misalignments are related to country growth experiences. Interestingly the work finds that there are important non-linearities in the relationship. Only very high over-valuations" appear to be associated with slower economic growth, while moderate to high (but not very high) under-valuations appear to be associated with more rapid economic growth.

Download or read book Equilibrium Exchange Rates written by Ronald MacDonald and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 353 pages. Available in PDF, EPUB and Kindle. Book excerpt: How successful is PPP, and its extension in the monetary model, as a measure of the equilibrium exchange rate? What are the determinants and dynamics of equilibrium real exchange rates? How can misalignments be measured, and what are their causes? What are the effects of specific policies upon the equilibrium exchange rate? The answers to these questions are important to academic theorists, policymakers, international bankers and investment fund managers. This volume encompasses all of the competing views of equilibrium exchange rate determination, from PPP, through other reduced form models, to the macroeconomic balance approach. This volume is essentially empirical: what do we know about exchange rates? The different econometric and theoretical approaches taken by the various authors in this volume lead to mutually consistent conclusions. This consistency gives us confidence that significant progress has been made in understanding what are the fundamental determinants of exchange rates and what are the forces operating to bring them back in line with the fundamentals.

Download or read book Real Exchange Rate Misalignment and Growth written by Ofair Razin and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Exchange Rate Misalignment written by Lawrence E. Hinkle and published by World Bank Publications. This book was released on 1999 with total page 640 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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."

Download or read book Does Mixed Frequency Vector Error Correction Model Add Relevant Information to Exchange Misalignment Calculus Evidence for United States written by Emerson Fernandes Marçal and published by . This book was released on 2014 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real exchange rate is an important macroeconomic price in the economy and affects economic activity, interest rates, domestic prices, trade and investments flows among other variables. Methodologies have been developed in empirical exchange rate misalignment studies to evaluate whether a real effective exchange is overvalued or undervalued. There is a vast body of literature on the determinants of long-term real exchange rates and on empirical strategies to implement the equilibrium norms obtained from theoretical models. This study seeks to contribute to this literature by showing that it is possible to calculate the misalignment from a mixed cointegrated vector error correction framework. An empirical exercise using United States' real exchange rate data is performed. The results suggest that the model with mixed frequency data is preferred to the models with same frequency variables.

Download or read book The Equilibrium Real Exchange Rate of the Malagasy Franc written by Mr.John Cady and published by International Monetary Fund. This book was released on 2003-02-01 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Revisiting the Real Exchange Rate Misalignment economic Growth Nexus Via the Across sector Misallocation Channel written by Claire Giordano and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Exchange Rate Misalignment in Developing Countries Under the Floating Exchange Rate Regime written by Gae-Iyong Choi and published by . This book was released on 1996 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Exchange Rate Misalignment in Developing Countries written by Wishnu Mahraddika and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Devaluing to Prosperity written by Surjit S. Bhalla and published by Peterson Institute. This book was released on 2012 with total page 283 pages. Available in PDF, EPUB and Kindle. Book excerpt: Experts have long questioned the effect of currency undervaluation on overall GDP growth. They have viewed the underlying basis for this policy--intervention in currency markets to keep the price of the home currency cheap--as doomed to failure on both theoretical and empirical grounds. Moreover, the view has been that overvalued currencies hurt economic growth but undervalued currencies cannot help in growth acceleration. A parallel belief has been that the real exchange rate--that is, a country's competitive ranking--cannot be affected by merely changing the nominal exchange rate. This view is grounded in the belief, and expectation, that inflation follows any devaluation of currency. Hence, the conclusion that the real exchange rate cannot be affected by policy. However, given China's remarkable performance in recent decades, this traditional view is being reexamined. China devalued its currency by large amounts in the 1980s and early 1990s; instead of inflation, it achieved high growth. Today, there is near-universal demand for China to significantly revalue its currency. This book examines the veracity of various propositions relating to currency misalignments, and their effect on various items of policy interest. The author subjects more than a century of global exchange rate management and growth outcomes to rigorous empirical analysis and demonstrates convincingly that a country can systematically devalue and yet prosper. The analysis helps in interpreting several phenomena, especially for the last three decades, which have witnessed high economic growth in developing countries, a widening of global imbalances, and a sharp increase in reserve accumulation, particularly among high-growth Asian economies. The book shows that these events are strongly linked via a consistent policy of currency undervaluation in Asian economies.

Download or read book Quo Vadis Real Estimating the Brazilian Real Exchange Rate Misalignment in Vector Error Correction Model with Structural Change written by Emerson Fernandes Marçal and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper aims to estimate the equilibrium real exchange rate for the Brazilian economy. The equilibrium exchange rate is defined as the level of exchange rate that guarantees the stability of the net foreign asset position over time. An econometric model is estimated using a Vector Error Correction Model with structural breaks. The main conclusion of the paper is that the Brazilian exchange rate is below its long run values. The model also suggests that the improvement in fundamentals observed in the recent past is about to end. The level of misalignment is estimated at 18% in third quarter of 2009.