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Single-equation estimation of the equilibrium real exchange rate

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Author Info
Baffes, John
Elbadawi, Ibrahim A.
O'Connell, Stephen A.

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Abstract

Estimating the degree of exchange-rate misalignment remains one of the most challenging empirical problems in an open economy. The basic problem is that the value of the real exchange rate is not observable. Standard theory tells us, however, that the equilibrium real exchange rate is a function of observable macroeconomic variables and that the actual real exchange rate approaches the equilibrium rate over time. A recent strand of the empirical literature exploits these observations to develop a single-equation approach to estimating the equilibrium real exchange rate. Drawing on that earlier work, the authors outline an econometric methodology for estimating both the equilibrium real exchange rate and the degree of exchange-rate misalignment. They illustrate the methodology using annual data from Cote d'Ivoire and Burkina Faso.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1800.

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Date of creation: 31 Aug 1997
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Handle: RePEc:wbk:wbrwps:1800

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Keywords: Fiscal&Monetary Policy Economic Theory&Research Environmental Economics&Policies ICT Policy and Strategies Scientific Research&Science Parks Economic Stabilization Macroeconomic Management Economic Theory&Research Environmental Economics&Policies Pro-Poor Growth and Inequality

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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.:
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  25. Elbadawi, Ibrahim A. & Soto, Raimundo, 1994. "Capital flows and long-term equilibrium real exchange rates in Chile," Policy Research Working Paper Series 1306, The World Bank. [Downloadable!]
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  1. Paul Cashin & Luis Felipe Céspedes & Ratna Sahay, 2003. "Commodity Currencies and the Real Exchange Rate," Working Papers Central Bank of Chile 236, Central Bank of Chile. [Downloadable!]
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  2. Alberola, Enrique & Lopes, Humberto & Serven, Luis, 2004. "Tango with the Gringo: the hard peg and real misalignment in Argentina," Policy Research Working Paper Series 3322, The World Bank. [Downloadable!]
  3. Chernookiy Valery, 2005. "Adjustment to the Asymmetric Shocks and Currency Unions: the Case of Belarus and Russia," EERC Working Paper Series 05-07e, EERC Research Network, Russia and CIS. [Downloadable!]
  4. Frait, Jan & Komarek, Lubos & Meleck, Martin, 2006. "The Real Exchange Rate Misalignment in the Five Central European Countries," The Warwick Economics Research Paper Series (TWERPS) 739, University of Warwick, Department of Economics. [Downloadable!]
  5. Mustapha Kamel Nabli & Marie-Ange Véganzonès-Varoudakis, 2004. "How does exchange rate policy affect manufactured exports in MENA countries?," Applied Economics, Taylor and Francis Journals, vol. 36(19), pages 2209-2219, September. [Downloadable!] (restricted)
  6. Turan Subasat, 2008. "Exchange Rate Policies: Fact or Fiction in the Rise of High Performance Asian Economies," Working Papers 0802, Izmir University of Economics. [Downloadable!]
  7. Jinzao Chen, 2007. "Behavior Equilibrium Exchange Rate and Misalignment of Renminbi: A Recent Empirical Study," DEGIT Conference Papers c012_013, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  8. Byung-Yeon Kim & Iikka Korhonen, 2002. "Equilibrium Exchange Rates in Transition Countries: Evidence from Dynamic Heterogeneous Panel Models," Macroeconomics 0212014, EconWPA. [Downloadable!]
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  9. Satish Chand, 2001. "How misaligned is the Australian real exchange rate?," Macroeconomics Working Papers 559, East Asian Bureau of Economic Research. [Downloadable!]
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  10. Kim, Byung-Yeon, 2001. "Determinants of Inflation in Poland: A Structural Cointegration Approach," BOFIT Discussion Papers 16/2001, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  11. Atsushi Iimi, 2006. "Exchange Rate Misalignment: An Application of the Behavioral Equilibrium Exchange Rate (BEER) to Botswana," IMF Working Papers 06/140, International Monetary Fund. [Downloadable!]
  12. Pablo Astorga, 2007. "Real Exchange Rates in Latin America: what does the 20th Century reveal?," Working Papers in Economic History wp07-03, Universidad Carlos III, Departamento de Historia Económica e Instituciones. [Downloadable!]
  13. Mkenda, Beatrice Kalinda, 2001. "Long-run and Short-run Determinants of the Real Exchange Rate in Zambia," Working Papers in Economics 40, Göteborg University, Department of Economics. [Downloadable!]
  14. Christine Richaud & AristomÈne Varoudakis & Marie-Ange VÉganzonÈs, 2003. "Real exchange rate and openness in emerging economies: Argentina in the long run," Applied Economics, Taylor and Francis Journals, vol. 35(3), pages 293-303, January. [Downloadable!] (restricted)
  15. Elbadawi, Ibrahim A., 1999. "Can Africa export manufactures? The role of endowment, exchange rates, and transaction costs," Policy Research Working Paper Series 2120, The World Bank. [Downloadable!]
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