Exchange rate misalignments, interdependence, crises, and currency wars: an empirical assessment

Abstract

ContentsThis study aims to compare two different methodologies of calculating exchange rate misalignment and test whether there is interdependence among countries in determining the real effective exchange rate. Two different econometric approaches are used to achieve these goals. The first one involves estimating a multivariate time series model that contains only country-specific variables and evaluating if this basic model can be improved by adding other countries' variables. The study uses the algorithm suggested by Hendry and Krolzig (2005). to select the best model specification. The second strategy involves estimating long panel data with the real effective exchange rate and fundamentals for a group of countries and explicitly testing the interdependence hypothesis. The results suggest that the long-run exchange rate is mainly driven by its own fundamentals for most countries. The existence of interdependence is restricted to short-run dynamics. Este trabalho tem por objetivo comparar metodologias distintas para cálculo de desalinhamento cambial além de testar a hipótese se as taxas de câmbio dos diversos países sofrem influencia apenas dos seus próprios fundamentos ou também da taxa de câmbio e dos fundamentos de outros países. Estas hipóteses consistem, respectivamente, na ausência ou na existência de interdependência entre os diversos países. Para realizar tal tarefa utilizam-se duas estratégias empíricas. A primeira baseia-se em avaliar se

The Effects of Currency Protectionism on the Exports of the Trade Partners - A Composite Index

“…It can carry many risks. Marçal (2014) for example, states that a country's economic sizes play an important role, especially if that country is an important economic factor in the international economy. In particular, it notes that the application of a competitive devaluation of a country's exchange rate can have a long-term impact on the exchange rate of the other countries if it permanently affects the level of a country's key variables, i.e., if it is a countless global economy.…”