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A Darwinian perspective on “exchange rate undervaluation”

Qingyuan Du and Shang-Jin Wei

European Economic Review, 2016, vol. 83, issue C, 111-138

Abstract: This paper studies how status competition for marriage partners can generate surprising effects on the real exchange rate (RER). In theory, a rise in the sex ratio (increasing relative surplus of men) can generate a decline in the RER. The effect can be quantitatively large if the biological desire for a marriage partner is strong. We also provide within-China and cross-country empirical evidence to support the theory. As an application, our cross-country estimation suggests that sex ratio as well as other factors in the existing literature can account for the recent evolution in Chinese RER almost completely.

Keywords: Surplus men; Equilibrium real exchange rate; Currency manipulation (search for similar items in EconPapers)
JEL-codes: F3 F4 J1 J7 (search for similar items in EconPapers)
Date: 2016
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Working Paper: A Darwinian Perspective on “Exchange Rate Undervaluation” (2015) Downloads
Working Paper: A Darwinian Perspective on "Exchange Rate Undervaluation" (2012) Downloads
Working Paper: A Darwinian Perspective on "Exchange Rate Undervaluation" (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:83:y:2016:i:c:p:111-138

DOI: 10.1016/j.euroecorev.2015.12.010

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