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Aggregate and sector-specific exchange rate indexes for the Portuguese economy

Author

Listed:
  • Fernando Alexandre

    (Escola de Economia e Gestão and NIPE, University of Minho)

  • Pedro Bação

    (University of Coimbra and GEMF)

  • João Cerejeira

    (Escola de Economia e Gestão and NIPE, University of Minho)

  • Miguel Portela

    (Escola de Economia e Gestão and NIPE, University of Minho and IZA)

Abstract

Economic theory and empirical evidence suggest that fluctuations in exchange rates may have strong reallocation effects. Accession to the Exchange Rate Mechanism in 1992, and then to the European Monetary Union in 1999, implied a drastic change in the behaviour of Portugal’s exchange rate indexes. The analysis of those indexes is therefore bound to play an important role in the study of the evolution of the Portuguese economy in the last two decades. However, there are many alternative exchange rate indexes. In this paper, we compute and compare aggregate and sector-specific exchange rate indexes for the Portuguese economy. We find that alternative effective exchange rate indexes are very similar between them. We also find that sector-specific effective exchange rates are strongly correlated with aggregate indexes. Nevertheless, we show that sector-specific exchange rates are more informative than aggregate exchange rates in explaining changes in employment: whereas aggregate indexes are statistically insignificant in employment equations, regressions using sector-specific exchange rate indexes show a statistically significant and economically large effect of exchange rates on employment.

Suggested Citation

  • Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," GEE Papers 0016, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2009.
    • Handle: RePEc:mde:wpaper:0016
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    File URL: https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_16.pdf
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    Cited by:

    1. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 195-218, June.
    2. Kiyotaka SATO & Junko SHIMIZU & Nagendra SHRESTHA & Shajuan ZHANG, 2015. "Industry-specific Real Effective Exchange Rates in Asia," Discussion papers 15036, Research Institute of Economy, Trade and Industry (RIETI).
    3. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2011. "Employment and Exchange Rates: The Role of Openness and Technology," Open Economies Review, Springer, vol. 22(5), pages 969-984, November.
    4. Pedro Bação & Sara Cerdeira & António Portugal Duarte, 2019. "Portugal in the Eurozone: Evolution and Expectations," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(si), pages 173-189, December.
    5. Kiyotaka SATO & Junko SHIMIZU & Nagendra SHRESTHA & Shajuan ZHANG, 2013. "Exchange Rate Appreciation and Export Price Competitiveness: Industry-specific real effective exchange rates of Japan, Korea, and China," Discussion papers 13032, Research Institute of Economy, Trade and Industry (RIETI).
    6. repec:mbr:jmonec:v:10:y:2015:i:4:p:79-94 is not listed on IDEAS
    7. Alexandre, Fernando & Bação, Pedro & Cerejeira, João & Portela, Miguel, 2010. "Manufacturing Employment and Exchange Rates in the Portuguese Economy: The Role of Openness, Technology and Labour Market Rigidity," IZA Discussion Papers 5251, Institute of Labor Economics (IZA).
    8. Kiyotaka Sato & Junko Shimizu & Nagendra Shrestha & Shajuan Zhang, 2013. "Industry-specific Real Effective Exchange Rates and Export Price Competitiveness: The Cases of Japan, China, and Korea," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 298-321, December.
    9. Kiyotaka SATO & Junko SHIMIZU & Nagendra SHRESTHA & Shajuan ZHANG, 2012. "The Construction and Analysis of Industry-specific Effective Exchange Rates in Japan," Discussion papers 12043, Research Institute of Economy, Trade and Industry (RIETI).
    10. Fernando Alexandre & Hélder Costa & Miguel Portela & Miguel Rodrigues, 2018. "Asymmetric regional dynamics: from bust to recovery," NIPE Working Papers 17/2018, NIPE - Universidade do Minho.

    More about this item

    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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