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Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries

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  • Mark Lewis
  • Aurélie Martin
  • Gabriel Di Bella
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    Abstract

    Assessing a country''s competitiveness routinely starts with an analysis of the real exchange rate. However, in low-income countries, empirical analysis of the real exchange rate is often subject to important limitations that seriously weaken the results. This paper summarizes the methodologies used to assess real exchange rate misalignments and discusses the range of obstacles common to low-income countries. Recognizing the importance of using a wide range of indicators for assessing competitiveness in low-income countries, the paper discusses alternative competitive measures and then proposes a template of indicators to allow for a systematic assessment of competitiveness in low-income countries. The template is then used to rank countries according to their competitiveness performance in 2006.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/201.

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    Length: 46
    Date of creation: 01 Aug 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/201

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    Related research

    Keywords: Export competitiveness; Real effective exchange rates; Low-income developing countries; reer; exchange rate; export volume; exchange rates; real exchange rate; export sector; export market shares; export market; global competitiveness; real exchange rates; oil exports; capital flows; exchange rate misalignments; real exchange rate misalignments; nominal exchange rate; equilibrium exchange rate; export performance; current account balance; effective exchange rate; export volumes; oil exporting; real effective exchange rate; import prices; foreign exchange; effective exchange rates; market exchange rates; oil export; export growth; exchange rate level; nominal effective exchange rate; diversified export base; export good; export share; export sectors; share of exports; exchange rate misalignment; real exchange rate misalignment; exported good; open economy macroeconomics; export base; export structure; parallel exchange rates; multiple currency practices; commodity exporters; exporters; oil export volume; exportable ? goods; international markets; export unit; multiple exchange rate; world exports; parallel exchange rate; exchange rate data;

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    References

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    1. Kenneth Rogoff, 1992. "Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Exchange Rate," NBER Working Papers 4119, National Bureau of Economic Research, Inc.
    2. MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank, Research Centre.
    3. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    4. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
    5. Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, International Monetary Fund.
    6. T. W.Swan, 1960. "Economic Control In A Dependent Economy," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 51-66, 03.
    7. Mark Lewis & Jean-Claude Nachega & Said Bakhache & Kadima D. Kalonji, 2006. "Assessing Competitiveness After Conflict," IMF Working Papers 06/303, International Monetary Fund.
    8. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
    9. Ronald Mac Donald, 1998. "What Do We Really Know About Real Exchange Rates?," Working Papers 28, Oesterreichische Nationalbank (Austrian Central Bank).
    10. Aasim M. Husain, 2006. "To Peg or Not to Peg," IMF Working Papers 06/54, International Monetary Fund.
    11. Devarajan, Shantayanan & Lewis, Jeffrey D & Robinson, Sherman, 1993. "External Shocks, Purchasing Power Parity, and the Equilibrium Real Exchange Rate," World Bank Economic Review, World Bank Group, vol. 7(1), pages 45-63, January.
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    Citations

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    Cited by:
    1. Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness," IMF Working Papers 08/172, International Monetary Fund.
    2. Lone Christiansen & Alessandro Prati & Luca Antonio Ricci & Thierry Tressel, 2010. "External Balance in Low-Income Countries," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 265-322 National Bureau of Economic Research, Inc.
    3. Klaus-Stefan Enders, 2009. "Exchange Rate Assessment for Oil Exporters," IMF Working Papers 09/81, International Monetary Fund.
    4. Blaise Gnimassoun, 2012. "Taux de change et mésalignements du franc CFA avant et après l’introduction de l’euro," EconomiX Working Papers 2012-3, University of Paris West - Nanterre la Défense, EconomiX.
    5. Emilio Pineda & Paul Cashin & Yan Sun, 2009. "Assessing Exchange Rate Competitiveness in the Eastern Caribbean Currency Union," IMF Working Papers 09/78, International Monetary Fund.

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