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Real Exchange Rates in the Developing Countries: Concepts and Measure- ment

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Sebastian Edwards

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Abstract

This paper deals with three important issues related to real exchange rates. First, it discusses the analytical concept of real exchange rate (RER) placing particular emphasis on providing an operational definition for the equilibrium real exchange rate. Of course, once this concept is defined we can begin to discuss in a meaningful way what we mean by real exchange rate misalignment, or deviations of the actual RER from its equilibrium value. Second, this paper deals with problems associated with measuring real exchange rates. Several proposals are analyzed and the more serious problems encountered when attempting to compute RER's in the developing countries are discussed. And third, I analyze the actual behavior of RER's in a number of developing countries. Here, issues related to the behavior of alternative indexes and to the statistical properties of real exchange rates are emphasized. Additionally, I study the real consequences of increased real exchange rate volatility.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2950.

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Date of creation: Apr 1989
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Publication status: published as With Jonathan D. Ostry, "Anticipated Protectionist Policies, Real Exchange Rates, and the Current Account: The Case of Rigid Wages", JIMF, Vol. 9,no. 2 (1990). With Jonathan D. Ostry, "Terms of Trade Disturbances, Real Exchange Rates, and Welfare: The Role of Capital Controls and Labor Market Distortions, DEP."Tariffs, Capital Controls, and Equilibrium Real Exchange Rates", CANJE, Vol. 22, no. 1 (1989): 79-92.
Handle: RePEc:nbr:nberwo:2950

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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. Artus, Jacques R., 1978. "Methods of assessing the long-run equilibrium value of an exchange rate," Journal of International Economics, Elsevier, vol. 8(2), pages 277-299, May. [Downloadable!] (restricted)
  2. Corbo, Vittorio & de Melo, Jaime & Tybout, James, 1986. "What Went Wrong with the Recent Reforms in the Southern Cone," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 607-40, April.
  3. Kemal Dervis & Peter A. Petri, 1987. "The Macroeconomics of Successful Development: What Are The Lessons?," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 211-262 National Bureau of Economic Research, Inc. [Downloadable!]
  4. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May. [Downloadable!] (restricted)
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(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. Boštjan Jazbec, 2002. "Real Exchange Rates in Transition Economies," William Davidson Institute Working Papers Series 482, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  2. Kevin Cowan & David Rappoport & Jorge Selaive, 2007. "High Frequency Dynamics of the Exchange Rate in Chile," Working Papers Central Bank of Chile 433, Central Bank of Chile. [Downloadable!]
  3. Byung-Yeon Kim & Iikka Korhonen, 2002. "Equilibrium Exchange Rates in Transition Countries: Evidence from Dynamic Heterogeneous Panel Models," Macroeconomics 0212014, EconWPA. [Downloadable!]
    Other versions:
  4. Leonardo Villar & Hernán Rincón, . "The Colombian Economy in the nineties: Capital Flows and Foreign Exchange Regimes," Borradores de Economia 149, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
  5. Boštjan Jazbec, 2002. "Balassa-Samuelson Effect in Transition Economies: The Case of Slovenia," William Davidson Institute Working Papers Series 507, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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