The Aftermath of Appreciations

Goldfajn, Ilan; Valdés, Rodrigo

doi:10.3386/w5650

Cited by 147 publications

(134 citation statements)

References 18 publications

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“…Trade restrictions may lead to higher domestic prices and more appreciated real exchange rates (Edwards and Ostry (1990) and Goldfajn and Valdes (1999)). The trade restriction index used below is a dummy variable that takes a value of 1 before liberalization and a value of 0 after liberalization, according to the liberalization years coded by Sachs and Warner (1995) and Wacziarg and Welch (2003).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Real Exchange Rates and Fundamentals: A Cross-Country Perspective

Ricci

Lee²,

Milesi‐Ferretti³

2008

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates. JEL Classification Numbers: F31; F41

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Section: Theoretical Backgroundmentioning

confidence: 99%

Real Exchange Rates and Fundamentals: A Cross-Country Perspective

Ricci

Lee²,

Milesi‐Ferretti³

2008

IMF Working Papers

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“…6 The trade weights are fixed and have been taken from Goldfajn and Valdés (1999). The OECD countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea, Luxembourg, The Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom.…”

Section: Datamentioning

confidence: 99%

Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates

Morales‐Zumaquero

Sosvilla‐Rivero

2010

Journal of International Money and Finance

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This paper attempts to determine whether or not nominal exchange rate regimes affect the volatility of bilateral and effective real exchange rates. To that end, we examine the real exchange rate behaviour for a set of OECD and non-OECD countries during the 1960-2006 period, therefore covering both the Bretton Woods system of fixed exchange rates and adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on the Hansen (1997)'s approximation to the p-values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of pvalues and to delimit periods of stability and instability in the variance of real exchange rates. Results suggest that there is clear evidence in favour of the non-neutrality of nominal exchange rate regime regarding real exchange rate volatility for developed countries, but not in the case of developing or emerging countries. JEL Classification Numbers: F31, F33, F41

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“…This is important because there is theoretical support and some empirical evidence that misalignment of the exchange rate is more strongly linked with fixed exchange rate regimes compared with more flexible ones. Goldfajn and Valdés (1999) find that currencies can appreciate significantly under fixed exchange rate regimes. More recent studies by Kemme and Roy (2005), Coudert and Couhard (2008), Holtemöller and Mallick (2008) and Caputo and Magendzo (2009) find that misalignment is more strongly associated with fixed regimes compared with floating ones.…”

mentioning

confidence: 91%

Misalignment Under Different Exchange Rate Regimes: The Case of Turkey

Dağdeviren¹,

Binatlı

Sohrabji

2011

SSRN Journal

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The paper examines misalignment of the Turkish lira between 1998 to 2008. Misalignment, specifically overvaluation has been linked to fixed exchange rate regimes. By studying the case of Turkey during this period which covers both a fixed and floating exchange rate regime, we contribute to the literature on the relation between misalignment and exchange rate regimes. We first estimate the equilibrium real exchange rate for Turkey, then compute misalignment and finally test for structural breaks in the misalignment series. Through our tests we find three structural regimes which we call the pre-crisis period, the transition period and the post-crisis period. We find considerable overvaluation in first regime, which is when Turkey had a fixed exchange rate regime. This was not the case for the periods that had floating exchange rates. Thus, we conclude that overvalued currencies that have been linked to financial crises are a more serious concern for fixed exchange rate regimes.

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The Aftermath of Appreciations

Cited by 147 publications

References 18 publications

Real Exchange Rates and Fundamentals: A Cross-Country Perspective

Real Exchange Rates and Fundamentals: A Cross-Country Perspective

Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates

Misalignment Under Different Exchange Rate Regimes: The Case of Turkey

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