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Exchange rate misalignment estimates – Sources of differences

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  • Cheung , Yin-Wong

    ()
    (BOFIT)

  • Fujii, Eiji

    (BOFIT)

Abstract

We study the differences in currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a country’s participation status in the ICP survey and its data quality – a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The patterns of changes in estimated degrees of misalignment across individual countries, as exemplified by the BRIC economies, are highly variable.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 25/2011.

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Length: 56 pages
Date of creation: 11 Nov 2011
Date of revision:
Handle: RePEc:hhs:bofitp:2011_025

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: Penn effect regression; data revision; PPP-based data; measurement factors; economic factors;

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