Response of the Equilibrium Real Exchange Rate to Real Disturbances in Developing Countries

Mohsin Khan and Jonathan Ostry

No 1991/003, IMF Working Papers from International Monetary Fund

Abstract: Using a simple dependent - economy framework, this paper outlines the links between the equilibrium real exchange rate and some of its fundamental exogenous determinants, mainly terms of trade movements and commercial policy changes. Drawing on existing studies of trade flows in developing countries, it is possible to derive plausible quantitative ranges for the response of the equilibrium real exchange rate to both external and policy-induced shocks. The results should be particularly relevant in designing real exchange rate targets and rules that allow for movements in the equilibrium real exchange rate in response to various shocks.

Keywords: WP; exchange rate; exchange rate rule; real exchange rate (search for similar items in EconPapers)
Pages: 18
Date: 1991-01-01
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Citations: View citations in EconPapers (13)

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Journal Article: Response of the equilibrium real exchange rate to real disturbances in developing countries (1992)
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