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Misalignment and Managed Exchange Rates

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Author Info

  • G. C. Lim

Abstract

This paper proposes a methodology for analyzing dynamic misalignment in managed exchange rate systems that combines the estimation approach to modeling the real exchange rate with the calibration approach to generating the equilibrium real exchange rate. The methodology is applied to the Thai baht and the model is estimated using only pre-July 1997 data. An analysis of the difference between the evolution of the actual real exchange rate and the generated equilibrium rate - the misalignment gap - reveals the extent to which the market was persistently factoring in an expected depreciation of the Thai baht.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/63.

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Length: 28
Date of creation: 01 Mar 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/63

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Related research

Keywords: Exchange rates; Economic models; exchange rate; real exchange rate; equation; cointegration; equilibrium exchange rate; real exchange rates; exchange rate regimes; exchange rate system; calibration; statistics; heteroscedasticity; real exchange rate misalignment; surveys; nominal exchange rate; spot exchange rates; exchange rate misalignment; equations; computation; official exchange rate; time series; exchange rate changes; floating exchange rate regimes; basket of currencies; probability; financial statistics; floating exchange rate; standard errors; exchange rate mechanism; general equilibrium model; exchange rate appreciations; fixed exchange rate regime; constant term; empirical measure; foreign exchange; real exchange rate behavior; nominal exchange rates; econometrics; exchange rate systems; exchange arrangements; exchange rate regime; number of variables; exchange rate variability; fixed exchange rate; hypothesis testing; exchange rate behavior; survey;

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Citations

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Cited by:
  1. Balázs Égert, 2002. "Equilibrium Real Exchange Rates in Central Europe's Transition Economies: Knocking on Heaven's Door," William Davidson Institute Working Papers Series 480, William Davidson Institute at the University of Michigan.
  2. Piti Disyatat & Runchana Pongsaparn & Atchana Waiquamdee, 2005. "Effective Exchange Rates and Monetary Policy: The Thai Experience," Working Papers, Economic Research Department, Bank of Thailand 2005-07, Economic Research Department, Bank of Thailand.
  3. Clark, Peter B. & MacDonald, Ronald, 2004. "Filtering the BEER: A permanent and transitory decomposition," Global Finance Journal, Elsevier, vol. 15(1), pages 29-56.
  4. Jongwanich, Juthathip, 2009. "Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia," ADB Economics Working Paper Series 151, Asian Development Bank.
  5. Siregar, Reza, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," MPRA Paper 28987, University Library of Munich, Germany.
  6. Dubas, Justin M., 2009. "The Importance of the Exchange Rate Regime in Limiting Misalignment," World Development, Elsevier, Elsevier, vol. 37(10), pages 1612-1622, October.

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