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Exchange Rate Misalingment Estimates - Sources of Differences

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  • Yin-Wong Cheung
  • Eiji Fujii

Abstract

We study the differences of currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a country’s participation status in the ICP survey and its data quality – a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The patterns of changes in the estimated degree of misalignment across individual countries, as illustrated by the BRIC economies, are quite variable.

Suggested Citation

  • Yin-Wong Cheung & Eiji Fujii, 2011. "Exchange Rate Misalingment Estimates - Sources of Differences," CESifo Working Paper Series 3555, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3555
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    References listed on IDEAS

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    More about this item

    Keywords

    Penn Effect Regression; data revision; PPP-based data; measurement factors; economic factors;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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