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The Equilibrium Real Exchange Rate in a Commodity Exporting Country; The Case of Russia

  • International Monetary Fund

Questions about external competitiveness, exchange rate misalignment, and the appropriate exchange rate policy feature prominently in the Russian policy debate. This paper furthers the debate by estimating empirically Russia's equilibrium real exchange rate (ERER)-that is, the rate consistent with the long-run economic fundamentals-and sheds light on the extent to which exchange rate policy should be changed. The paper confirms that the ERER reflects both productivity and the terms of trade. It suggests that Russia should target a significant medium-term current account deterioration and a real appreciation perhaps exceeding 10 percent. However, this latter number remains very sensitive to the assumed long-run oil prices.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/93.

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Length: 22
Date of creation: 01 May 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/93
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  1. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2002. "External Wealth, the Trade Balance, and the Real Exchange Rate," IMF Working Papers 02/51, International Monetary Fund.
  2. Carmen Reinhart, 1994. "Devaluation, Relative Prices, and International Trade; Evidence From Developing Countries," IMF Working Papers 94/140, International Monetary Fund.
  3. Joannes Mongardini, 1998. "Estimating Egypt's Equilibrium Real Exchange Rate," IMF Working Papers 98/5, International Monetary Fund.
  4. Hamid Faruqee, 1994. "Long-Run Determinants of the Real Exchange Rate; A Stock-Flow Perspective," IMF Working Papers 94/90, International Monetary Fund.
  5. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
  6. Ronald Macdonald, 1995. "Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 437-489, September.
  7. Broeck, Mark De & Sløk, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition.
  8. Steven A. Symansky & Peter B. Clark & Leonardo Bartolini & Tamim Bayoumi, 1994. "Exchange Rates and Economic Fundamentals; A Framework for Analysis," IMF Occasional Papers 115, International Monetary Fund.
  9. Peter C.B. Phillips & Mico Loretan, 1989. "Estimating Long Run Economic Equilibria," Cowles Foundation Discussion Papers 928, Cowles Foundation for Research in Economics, Yale University.
  10. Khan, Mohsin S. & Ostry, Jonathan D., 1992. "Response of the equilibrium real exchange rate to real disturbances in developing countries," World Development, Elsevier, vol. 20(9), pages 1325-1334, September.
  11. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
  12. International Monetary Fund, 2002. "Russian Federation; Selected Issues and Statistical Appendix," IMF Staff Country Reports 02/75, International Monetary Fund.
  13. Tarhan Feyzioglu, 1997. "Estimating the Equilibrium Real Exchange Rate; An Application to Finland," IMF Working Papers 97/109, International Monetary Fund.
  14. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  15. Sebastian Edwards, 1986. "Commodity Export Prices and the Real Exchange Rate in Developing Countries: Coffee in Colombia," NBER Chapters, in: Economic Adjustment and Exchange Rates in Developing Countries, pages 233-266 National Bureau of Economic Research, Inc.
  16. Claudio Paiva, 2001. "Competitiveness and the Equilibrium Exchange Rate in Costa Rica," IMF Working Papers 01/23, International Monetary Fund.
  17. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269, March.
  18. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment; Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
  19. Richard Clarida & Jordi Gali, 1994. "Sources of real exchange rate fluctuations: how important are nominal shocks?," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  20. International Monetary Fund, 2000. "The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union; A View From the Supply Side," IMF Working Papers 00/32, International Monetary Fund.
  21. Sebastian Edwards, 1986. "Real Exchange Rate Variability: An Empirical Analysis of the Developing Countries Case," NBER Working Papers 1930, National Bureau of Economic Research, Inc.
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