Correcting Real Exchange Rate Misalignment : Conceptual and Practical Issues

This paper studies the issue of real exchange rate misalignment and the difficulties in settling international real exchange rate disputes. The authors show theoretically that determining when a country should be sanctioned for real exchange rate "manipulations" is difficult: in some situations a country's real exchange rate targeting can be beneficial to other countries, while in others it is not. Regardless, it is difficult to establish whether a misaligned real exchange rate is intentionally manipulated rather than unintentionally caused by other policies or by various distortions in the economy. The paper continues by illustrating the difficulty in measuring real exchange rate misalignment, and provides a critical assessment of existing methodologies. It concludes by proposing a new method for measuring real exchange rate misalignment based on differences in marginal products between producers of tradable and non-tradable goods.

Bibliographic Details

Main Authors:	Eden, Maya, Nguyen, Ha
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2012-04
Subjects:	ACCESS TO INSURANCE, ACCOUNTS RECEIVABLE, ACCUMULATION OF RESERVES, ADVERSE SHOCKS, AGGREGATE DEMAND, AGGREGATE SUPPLY, ASSET VALUE, BANK POLICY, BANKING CRISIS, BENCHMARK, BENCHMARKS, BONDS, BUDGET CONSTRAINTS, BUFFER, CAPITAL CONTROLS, COLLATERAL, COLLATERALIZATION, CONSTANT RETURNS TO SCALE, CONSUMERS, CONSUMPTION BASKET, CONSUMPTION BASKETS, CONSUMPTION INCREASES, CONSUMPTION PATH, CONSUMPTION PLAN, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, CURRENT ACCOUNT BALANCES, CURRENT ACCOUNTS, DEPRECIATION, DEPRECIATIONS, DEPRESSION, DEVALUATIONS, DEVELOPMENT POLICY, DISPOSABLE INCOME, DISTORTION, DISTORTIONS, DISTRIBUTION OF WEALTH, DIVIDENDS, DOMESTIC CAPITAL, DOMESTIC CONSUMPTION, DOMESTIC CURRENCY, DOMESTIC DEMAND, DOMESTIC GOOD, DOMESTIC GOODS, DOMESTIC MARKET, DOMESTIC PRICE, DOMESTIC SAVING, DOMESTIC SAVINGS, DUMMY VARIABLE, ECONOMIC CONDITIONS, ECONOMIC GROWTH, EMERGING ECONOMIES, EMERGING ECONOMY, EMERGING MARKET, EMERGING MARKETS, EQUILIBRIUM, EQUILIBRIUM PRICES, EXCHANGE RATE DEPRECIATION, EXCHANGE RATE DETERMINATION, EXCHANGE RATE DYNAMICS, EXCHANGE RATE MISALIGNMENTS, EXCHANGE RATE NEED, EXCHANGE RATE REGIMES, EXCHANGE RATE TARGETING, EXPENDITURES, EXPORT SUBSIDIES, EXPORTERS, EXTERNALITIES, FINANCIAL DEVELOPMENT, FINANCIAL MARKETS, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FISCAL BALANCE, FISCAL POLICY, FIXED EFFECTS, FOREIGN ASSET, FOREIGN ASSET POSITION, FOREIGN ASSETS, FOREIGN CURRENCY, FOREIGN INTEREST, FOREIGN INTEREST RATE, FOREIGN MARKETS, FOREIGN RESERVE, FOREIGN RESERVES, FUTURE REAL EXCHANGE RATE, GDP, GDP PER CAPITA, GLOBAL MARKETS, GOVERNMENT BUDGET, GOVERNMENT CONSUMPTION, GOVERNMENT INTERVENTION, GOVERNMENT POLICIES, GOVERNMENT POLICY, GOVERNMENT SPENDING, GOVERNMENT SUBSIDIES, GROWTH RATE, HOLDING, IMPORTS, INEFFICIENCY, INSTRUMENT, INSURANCE, INTEREST PARITY, INTEREST RATE DECLINES, INTEREST RATE PARITY, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL PRICE, INTERNATIONAL TRADE, INVESTING, LABOR MARKET, LABOR MARKET SEGMENTATION, LIBERALIZATION, MACROECONOMIC BALANCE, MACROECONOMICS, MARGINAL PRODUCT, MARGINAL PRODUCTS, MARKET POWER, MARKET SEGMENTATION, MEDIUM OF EXCHANGE, MONETARY EXPANSION, MONEY DEMAND, MONEY SUPPLIES, MONEY SUPPLY, MONOPOLY, MULTIPLIERS, NATIONAL SECURITY, NEGATIVE EXTERNALITIES, NET EXPORTS, NOMINAL DEPRECIATION, NOMINAL EXCHANGE RATE, NOMINAL INTEREST RATE, OPTIMIZATION, OUTPUT GROWTH, PARETO EFFICIENCY, POLICY INSTRUMENTS, POLICY RESEARCH, POLITICAL ECONOMY, POPULATION GROWTH, POSITIVE EXTERNALITIES, POSITIVE EXTERNALITY, POVERTY REDUCTION, PRECAUTIONARY SAVINGS MOTIVE, PRICE CONTROLS, PRICE ELASTICITIES, PRICE OF EXPORTS, PRICE OF OIL, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTION INPUTS, PRODUCTIVITY, RATE OF RETURN, REAL COST, REAL EFFECTIVE EXCHANGE RATE, REAL EXCHANGE, REAL EXCHANGE RATE, REAL EXCHANGE RATE MISALIGNMENT, REAL EXCHANGE RATE MISALIGNMENTS, REAL EXCHANGE RATES, REAL GDP, RECESSION, RECESSIONS, RELATIVE PRICE, RELATIVE PRICES, RESERVE ACCUMULATION, RETURN, RETURNS, RISK SHARING, SAFETY NETS, SAVINGS RATES, SCATTER PLOTS, SETTLEMENT, SOURCE OF UNCERTAINTY, SPOT MARKET, STOCK HOLDERS, STOCK PRICE, TAX, TAX RATE, TAX RATES, TAX REVENUES, TAXATION, TRADABLE GOOD, TRADABLE GOODS, TRADE DEFICIT, TRADE LIBERALIZATION, TRADE RESTRICTION, TRADING, TRADING PARTNERS, UNDERVALUATION, VALUATION, WAGES, WEIGHTS, WORLD ECONOMY, WORLD INTEREST RATE, WORLD PRICE,
Online Access:	http://documents.worldbank.org/curated/en/2012/04/16235073/correcting-real-exchange-rate-misalignment-conceptual-practical-issues http://hdl.handle.net/10986/6048
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