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Real Exchange Rates and Australian Export Competitiveness

Author

Listed:
  • Matthew T. Jones

    (Reserve Bank of Australia)

  • Jenny Wilkinson

    (Reserve Bank of Australia)

Abstract

This paper develops several summary measures of the real exchange rate, based on the international price competitiveness of Australian exports. The concept of a real exchange rate is briefly discussed, as well as a number of methodological issues relating to the construction of exchange rate indices. Using bilateral export weights and relative price levels, a summary bilateral exchange rate index is developed. A summary index based on third country export weights is also developed to take account of some of the weaknesses inherent in a bilateral index. The merits of other exchange rate indices are discussed and compared. Particular attention is given to the behaviour of the real exchange rate in the period since the float of the Australian dollar in December 1983. Our results confirm that a large part of the depreciation of the real exchange rate in 1985 and 1986 was eroded by the subsequent appreciation of the Australian dollar.

Suggested Citation

  • Matthew T. Jones & Jenny Wilkinson, 1990. "Real Exchange Rates and Australian Export Competitiveness," RBA Research Discussion Papers rdp9005, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9005
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    File URL: https://www.rba.gov.au/publications/rdp/1990/9005.html
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    Cited by:

    1. Gordon Menzies & Geoffrey Heenan, 1993. "Explaining the Recent Performance of Australia’s Manufactured Exports," RBA Research Discussion Papers rdp9310, Reserve Bank of Australia.
    2. David W.R. Gruen & Jenny Wilkinson, 1991. "Australia’s Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials?," RBA Research Discussion Papers rdp9108, Reserve Bank of Australia.
    3. Don Harding, 2001. "Assessing the Adequacy of Measures of Australia’s Price Competitiveness and Structural Change," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(4), pages 458-466, December.
    4. Henry, Olan T. & Olekalns, Nilss, 2002. "Does the Australian dollar real exchange rate display mean reversion," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 651-666, October.

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