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Exchange rate misalignments and global imbalances

Author

Listed:
  • Jacques Mazier

    (CEPN - Centre d'Economie de l'Université Paris Nord - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord)

  • Jamel Saadaoui

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The chapter presents an evaluation of the global imbalances using the notion of Fundamental Equilibrium Exchange Rate (FEER), defined as the level of the exchange rate which allows the economy to reach the internal and external equilibrium simultaneously. Using a simple model of world trade FEERs are estimated for the main currencies (dollar, yuan, euro, yen, pound sterling, rest of the world). Large exchange rate misalignments can be observed in relation with global imbalances, especially for the dollar with an undervaluation at the end of the 1980s and an overvaluation in the first half of the 2000s, for the yuan with a long-lasting undervaluation from 1994 to 2010 and for the yen. The relation between exchange rate misalignments and growth is another issue which has been hotly debated. For illustration, preliminary results suggest the existence of a non-linear relation between both.

Suggested Citation

  • Jacques Mazier & Jamel Saadaoui, 2020. "Exchange rate misalignments and global imbalances," Post-Print hal-02626762, HAL.
    • Handle: RePEc:hal:journl:hal-02626762
    DOI: 10.4324/9780429437786-4
    as

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