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Misalignment and Managed Exchange Rates; An Application to the Thai Baht

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  • G. C. Lim

Abstract

This paper proposes a methodology for analyzing dynamic misalignment in managed exchange rate systems that combines the estimation approach to modeling the real exchange rate with the calibration approach to generating the equilibrium real exchange rate. The methodology is applied to the Thai baht and the model is estimated using only pre-July 1997 data. An analysis of the difference between the evolution of the actual real exchange rate and the generated equilibrium rate - the misalignment gap - reveals the extent to which the market was persistently factoring in an expected depreciation of the Thai baht.

Suggested Citation

  • G. C. Lim, 2000. "Misalignment and Managed Exchange Rates; An Application to the Thai Baht," IMF Working Papers 00/63, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/63
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    Cited by:

    1. Clark, Peter B. & MacDonald, Ronald, 2004. "Filtering the BEER: A permanent and transitory decomposition," Global Finance Journal, Elsevier, vol. 15(1), pages 29-56.
    2. Dubas, Justin M., 2009. "The Importance of the Exchange Rate Regime in Limiting Misalignment," World Development, Elsevier, vol. 37(10), pages 1612-1622, October.
    3. Reza Siregar, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81, April.
    4. MASUJIMA Yuki, 2015. "Assessing Asian Equilibrium Exchange Rates as Policy Instruments," Discussion papers 15038, Research Institute of Economy, Trade and Industry (RIETI).
    5. Jongwanich, Juthathip, 2009. "Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia," ADB Economics Working Paper Series 151, Asian Development Bank.
    6. repec:bth:wpaper:2005-07 is not listed on IDEAS
    7. Bal??zs ??gert, 2002. "Equilibrium Real Exchange Rates in Central Europe's Transition Economies: Knocking on Heaven's Door," William Davidson Institute Working Papers Series 480, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    Exchange rates; Economic models; Real exchange rate; misalignment; managed exchange rate system; time-series analysis; simulations; exchange rate; equation; cointegration; Thai Baht;

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