Real Exchange Rate Misalignments and Growth
Real exchange rate (RER) misalignment is now a standard concept in international macroeconomic theory and policy. However, there is neither a consensus indicator of misalignment, nor an agreed upon methodology for constructing such an indicator. This paper constructs an indicator of RER misalignment for a large sample of developed and developing countries. This indicator is based on a well-structured but simple extension of an IS-LM model of an open economy. The paper then uses regression analysis to explore whether RER misalignments are related to country growth experiences. Interestingly the work finds that there are important non-linearities in the relationship. Only very high over-valuations" appear to be associated with slower economic growth, while moderate to high (but not very high) under-valuations appear to be associated with more rapid economic growth.
|Date of creation:||Sep 1997|
|Date of revision:|
|Publication status:||published as Razin, Assaf and Efraim Sadka (eds.) International Economic Integration: Public Economics Perspectives. Cambridge: Cambridge University Press, 1999.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bosworth, B. & Collins, S.M. & Chen, Y.C., 1995.
"Accounting for Differences in Economic Growth,"
115, Brookings Institution - Working Papers.
- Barro, R.J., 1989.
"Economic Growth In A Cross Section Of Countries,"
RCER Working Papers
201, University of Rochester - Center for Economic Research (RCER).
- Leahy, John V & Whited, Toni M, 1996.
"The Effect of Uncertainty on Investment: Some Stylized Facts,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 28(1), pages 64-83, February.
- John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
- Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
- Michael Gavin & Ricardo Hausmann & Leonardo Leiderman, 1995. "The Macroeconomics of Capital Flows to Latin America: Experience and Policy Issues," IDB Publications (Working Papers) 5821, Inter-American Development Bank.
- John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, January.
- Michael Gavin & Ricardo Hausmann & Leonardo Leiderman, 1995. "Macroeconomics of Capital Flows to Latin America: Experience and Policy Issues," Research Department Publications 4012, Inter-American Development Bank, Research Department.
- Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
- repec:idb:wpaper:310 is not listed on IDEAS
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, 06-2016.
- Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6174. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.