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The Equilibrium Real Exchange Rate in a Commodity Exporting Country: The Case of Russia

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Author Info
Emil Stavrev
Nikola Spatafora

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Abstract

Questions about external competitiveness, exchange rate misalignment, and the appropriate exchange rate policy feature prominently in the Russian policy debate. This paper furthers the debate by estimating empirically Russia's equilibrium real exchange rate (ERER)-that is, the rate consistent with the long-run economic fundamentals-and sheds light on the extent to which exchange rate policy should be changed. The paper confirms that the ERER reflects both productivity and the terms of trade. It suggests that Russia should target a significant medium-term current account deterioration and a real appreciation perhaps exceeding 10 percent. However, this latter number remains very sensitive to the assumed long-run oil prices.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/93.

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Length: 21 pages
Date of creation: 21 May 2003
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Handle: RePEc:imf:imfwpa:03/93

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Keywords: Real effective exchange rates ; Russian Federation ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Broeck, Mark De & Sløk, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  2. Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December. [Downloadable!] (restricted)
    Other versions:
  3. Hamid Faruqee & Peter Isard, 1998. "Exchange Rate Assessment: Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
  4. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External wealth, the trade balance, and the real exchange rate," European Economic Review, Elsevier, vol. 46(6), pages 1049-1071, June. [Downloadable!] (restricted)
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  5. Staff Team, 2002. "Russian Federation: Selected Issues and Statistical Appendix," IMF Staff Country Reports 02/75, International Monetary Fund.
  6. Joannes Mongardini, 1998. "Estimating Egypt's Equilibrium Real Exchange Rate," IMF Working Papers 98/5, International Monetary Fund.
  7. Mohsin S. Khan & Jonathan David Ostry, 1991. "Response of the Equilibrium Real Exchange Rate to Real Disturbances in Developing Countries," IMF Working Papers 91/3, International Monetary Fund.
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  8. Claudio Paiva, . "Competitiveness and the Equilibrium Exchange Rate in Costa Rica," IMF Working Papers 01/23, International Monetary Fund.
  9. Tarhan Feyzioglu, 1997. "Estimating the Equilibrium Real Exchange Rate - An Application to Finland," IMF Working Papers 97/109, International Monetary Fund.
  10. Reinhart, Carmen, 1994. "Devaluation, Relative Prices, and International Trade," MPRA Paper 13708, University Library of Munich, Germany. [Downloadable!]
  11. Ronald MacDonald, 1995. "Long-Run Exchange Rate Modeling - A Survey of the Recent Evidence," IMF Working Papers 95/14, International Monetary Fund.
  12. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers 20012, Trinity College Dublin, Department of Economics. [Downloadable!]
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  13. Hamid Faruqee & Martin Fetherston & Peter Isard & G. Russell Kincaid, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
  14. Mark de Broeck & Vincent Koen, 2000. "The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union - A View from the Supply Side," IMF Working Papers 00/32, International Monetary Fund.
  15. Hamid Faruqee, 1994. "Long-Run Determinants of the Real Exchange Rate - A Stock-Flow Perspective," IMF Working Papers 94/90, International Monetary Fund.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Balázs Égert, 2005. "Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased?," William Davidson Institute Working Papers Series wp770, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  2. Faisal Ahmed & Nabil Ben Ltaifa & Todd Schneider & Saade Chami, 2007. "Yemen: Exchange Rate Policy in the Face of Dwindling Oil Exports," IMF Working Papers 07/5, International Monetary Fund. [Downloadable!]
  3. Nienke Oomes & Katerina Kalcheva, 2007. "Diagnosing Dutch Disease: Does Russia Have the Symptoms?," IMF Working Papers 07/102, International Monetary Fund. [Downloadable!]
    Other versions:
  4. Maurizio Michael Habib & Margarita Manolova Kalamova, 2007. "Are there oil currencies? The real exchange rate of oil exporting countries," Working Paper Series 839, European Central Bank. [Downloadable!]
  5. Li, Ying & Rowe, Francis, 2007. "Aid inflows and the real effective exchange rate in Tanzania," Policy Research Working Paper Series 4456, The World Bank. [Downloadable!]
  6. Balázs Égert, & László Halpern & Ronald MacDonald, 2005. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," William Davidson Institute Working Papers Series wp793, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  7. Katerina Smidkova & Ales Bulir, 2004. "Would Fast Sailing Towards the Euro Be Smooth?: What Fundamental Real Exchange Rates Tell Us About Acceding Economies," Macroeconomics 0408002, EconWPA. [Downloadable!]
    Other versions:
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