Exchange Rate Misalignments and World Imbalances: a FEER Approach for Emerging Countries

Nabil Aflouk, Se-Eun Jeong, Jacques Mazier and Jamel Saadaoui ()
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Nabil Aflouk: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique
Se-Eun Jeong: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique
Jamel Saadaoui: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique

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Abstract: Since the mid-1990s, the world imbalances have increased significantly with a large US current deficit facing Asian surpluses, mainly Chinese. Since 2007, a partial reduction of these imbalances has been obtained, largely thanks to production's decreases, without large exchange rate adjustments. The Asian surpluses have remained important. The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries' case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen. Chinese, Indian and Brazilian exchange rate policies have been much contrasted since the 1980s. The Indian rupee has been more often overvalued while a more balance situation prevailed in Brazil only since the 2000s. The Latin American countries have faced wider and more dispersed ERM and current imbalances than East Asian countries. But Argentina, Chile and Uruguay benefits now of undervalued currencies while Mexico is closer to equilibrium.

Keywords: Equilibrium Exchange Rate; Current Account Balance; Macroeconomic Balance; Emerging Countries; Taux de Change d'Equilibre; Balance courante; Equilibre Macro-économique; Pays Emergents (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-mon, nep-opm and nep-sea
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Published in Économie Internationale, 2011, 124 (Issue 4 2010), pp.31-74

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