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Equilibrium Exchange Rates and Misalignments: The Case of Homogenous Emerging Market Economies

Christian Tipoy (), Marthinus Breitenbach () and Mulatu Zerihun ()
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Christian Tipoy: Department of Economics, University of Pretoria, South Africa and School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Africa

No 201769, Working Papers from University of Pretoria, Department of Economics

Abstract: We compute the exchange rate misalignment for a set of emerging economies between 1980 and 2013 using the behavioural equilibrium exchange rate definition. The real equilibrium exchange rate is constructed using a parsimonious model and estimators that are robust to cross-sectional independence and small sample size bias. We find that these countries tend to intervene to avoid real appreciation of their currencies following a rise in relative productivity, casting doubt on the Balassa-Samuelson effect. East-Asian countries have maintained their currencies at an artificially low level in order to remain competitive and boost economic growth these past years. Length: 26 pages

Keywords: equilibrium exchange rate; panel cointegration; autoregressive distributed lag (search for similar items in EconPapers)
JEL-codes: F31 C23 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-opm
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