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Burden Sharing and Exchange-Rate Misalignments within the Group of Twenty

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  • Agnès Bénassy-Quéré
  • Pascale Duran-Vigneron
  • Amina Lahrèche-Revil
  • Mignon, Valerie

Abstract

We present equilibrium effective exchange rates for a set of industrial as well as developing countries, based on a methodology close to that used by Alberola et al. (2002), where the real exchange rate is jointly determined by external balance as well as internal balance. We then calculate equilibrium bilateral exchange rates against the US dollar. Finally, we investigate the size of bilateral misalignments depending on the number of flexible currencies within the G-20. To derive the full set of bilateral misalignments, we turn out the solution of adding an n+1th currency standing for the rest of the world, as this would imply G-20 countries transferring the burden of overall adjustment to third countries. Using various alternative numeraires, we show the diagnosis of bilateral misalignments to be robust for most currenci es. The lack of adjustment in some countries is shown to have an ambiguous effect on the adjustments beared by flexible currencies.
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Suggested Citation

  • Agnès Bénassy-Quéré & Pascale Duran-Vigneron & Amina Lahrèche-Revil & Mignon, Valerie, 2004. "Burden Sharing and Exchange-Rate Misalignments within the Group of Twenty," Working Papers 2004-13, CEPII research center.
    • Handle: RePEc:cii:cepidt:2004-13
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    References listed on IDEAS

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    More about this item

    Keywords

    Debt; Exchange rate; Current accounts;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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