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Misalignment and Managed Exchange Rates: An Application to the Thai Baht

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  • Ms. 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.

Suggested Citation

  • Ms. G. C. Lim, 2000. "Misalignment and Managed Exchange Rates: An Application to the Thai Baht," IMF Working Papers 2000/063, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/063
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    Citations

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    Cited by:

    1. Lee, Chin & M., Azali & Yusop, Zulkornain & Yusoff, Mohammed, 2008. "Is Malaysia exchange rate misalignment before the 1997 crisis?," MPRA Paper 40430, University Library of Munich, Germany.
    2. Omotosho, Babatunde S. & Wambai, Murjanatu, 2012. "Is the Naira-US Dollar Real Exchange Rate Misaligned?," MPRA Paper 98354, University Library of Munich, Germany.
    3. Dubas, Justin M., 2009. "The Importance of the Exchange Rate Regime in Limiting Misalignment," World Development, Elsevier, vol. 37(10), pages 1612-1622, October.
    4. Omotosho, Babatunde S., 2012. "Endogenous Structural Breaks and Real Exchange Rate Determination in Nigeria since Interbank Foreign Exchange Market (IFEM)," MPRA Paper 98306, University Library of Munich, Germany.
    5. Reza Siregar, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81.
    6. Kenny S, Victoria, 2019. "Macroeconomic Performance Indicators and Exchange Rate Misalignment in Nigeria," MPRA Paper 93292, University Library of Munich, Germany.
    7. Clark, Peter B. & MacDonald, Ronald, 2004. "Filtering the BEER: A permanent and transitory decomposition," Global Finance Journal, Elsevier, vol. 15(1), pages 29-56.
    8. MASUJIMA Yuki, 2015. "Assessing Asian Equilibrium Exchange Rates as Policy Instruments," Discussion papers 15038, Research Institute of Economy, Trade and Industry (RIETI).
    9. Jongwanich, Juthathip, 2009. "Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia," ADB Economics Working Paper Series 151, Asian Development Bank.
    10. Ramkishen S. Rajan & Rahul Sen & Reza Y. Siregar, 2004. "Misalignment of the Baht and its Trade Balance Consequences for Thailand in the 1980s and 1990s," The World Economy, Wiley Blackwell, vol. 27(7), pages 985-1012, July.
    11. Piti Disyatat & Runchana Pongsaparn & Atchana Waiquamdee, 2005. "Effective Exchange Rates and Monetary Policy: The Thai Experience," Working Papers 2005-07, Monetary Policy Group, Bank of Thailand.
    12. Bal??zs ??gert, 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.

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