Globalization, exports, and effective exchange rate indices
AbstractThis paper offers a new way of compiling effective exchange rate indices, which is then shown to perform generally better in prototype equations explaining total real exports than other published indices. Researchers can use this method to compile effective exchange rates, real or nominal, readily for any country. The generally superior performance, based on cointegration tests using data from four major economies, four Latin American countries, and four South East Asian countries, suggests the proposed index which uses GDP weights rather than trade weights, is more appropriate in a highly globalized world. Intensified globalization in the past two decades appears indicated by the higher elasticities of exports with respect to the real effective exchange rate over time.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 31 (2012)
Issue (Month): 5 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Effective exchange rate indices; Real effective exchange rate indices; GDP-weighted effective exchange rates; Globalization; Estimated exports functions;
Find related papers by JEL classification:
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
- F30 - International Economics - - International Finance - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
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- Menzie D. Chinn, 2005.
"A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation,"
NBER Working Papers
11521, National Bureau of Economic Research, Inc.
- Menzie Chinn, 2006. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," Open Economies Review, Springer, vol. 17(1), pages 115-143, January.
- Lok Sang Ho, 2000. "Towards a New International Monetary Order: The World Currency Unit and the Global Indexed Bond," The World Economy, Wiley Blackwell, vol. 23(7), pages 939-950, 07.
- Campbell, Douglas L & Pyun, Ju Hyun, 2014. "Through the Looking Glass: A WARPed View of Real Exchange Rate History," MPRA Paper 55870, University Library of Munich, Germany.
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