A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation
AbstractSeveral alternative measures of â€œeffectiveâ€ exchange rates are discussed in the context of their theoretical underpinnings and construction. Focusing on contemporary indices and recently-developed econometric methods, the empirical characteristics of these differing series are examined for the U.S., the euro area, and several East Asian countries. The issues that confront the applied economist or policymaker in using the measures of real effective exchange rates available are illustrated in several case studies from current interest: (i) evaluating exchange rate misalignment; (ii) testing the Balassa-Samuelson effect; (iii) estimating the price responsiveness of trade flows; and (iv) assessing the potential impact of competitive devaluations. Copyright Springer Science + Business Media, Inc. 2006
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 17 (2006)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=100323
real effective exchange rate; overvaluation; competitiveness; stationarity; cointegration; trade balance;
Other versions of this item:
- 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.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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