Exchange Rate Misalignment in Developing Countries
AbstractThis 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 devaluations and several alternative approaches, are then evaluated. Copyright 1989 by Oxford University Press.
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Bibliographic InfoArticle provided by World Bank Group in its journal World Bank Research Observer.
Volume (Year): 4 (1989)
Issue (Month): 1 (January)
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- Sebastian Edwards, 1987. "Exchange Rate Misalignment in Developing Countries," UCLA Economics Working Papers 442, UCLA Department of Economics.
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