Assessing Competitiveness And Real Exchange Rate Misalignment In Low Income Countries

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Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries

Gabriel Di Bella,Mark Lewis,Aurélie Martin
Assessing Competitiveness and Real Exchange Rate Misalignment in Low Income Countries Book PDF

Author : Gabriel Di Bella,Mark Lewis,Aurélie Martin
Publisher : International Monetary Fund
Page : 54 pages
File Size : 47,8 Mb
Release : 2007-08
Category : Business & Economics
ISBN : UCSD:31822035536069

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Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries by Gabriel Di Bella,Mark Lewis,Aurélie Martin Pdf

Assessing a country's competitiveness routinely starts with an analysis of the real exchange rate. However, in low-income countries, empirical analysis of the real exchange rate is often subject to important limitations that seriously weaken the results. This paper summarizes the methodologies used to assess real exchange rate misalignments and discusses the range of obstacles common to low-income countries. Recognizing the importance of using a wide range of indicators for assessing competitiveness in low-income countries, the paper discusses alternative competitive measures and then proposes a template of indicators to allow for a systematic assessment of competitiveness in low-income countries. The template is then used to rank countries according to their competitiveness performance in 2006.

Exchange Rate Misalignment in Developing Countries

Sebastian Edwards,World Bank
Exchange Rate Misalignment in Developing Countries Book PDF

Author : Sebastian Edwards,World Bank
Publisher : Johns Hopkins University Press
Page : 110 pages
File Size : 44,5 Mb
Release : 1988
Category : Business & Economics
ISBN : STANFORD:36105040907409

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Exchange Rate Misalignment in Developing Countries by Sebastian Edwards,World Bank Pdf

This article analyzes the theory of equilibrium real exchange rates and defines misalignment as a deviation of the real exchange rate (RER) from its equilibrium level. The role of macroeconomic policies is then analyzed under three alternative nominal exchange rate regimes: predetermined nominal exchange rates; floating nominal rates; and dual or black market nominal exchange rates. This discussion points out how inconsistent macroeconomic policies often lead to real exchange rate misalignment. Corrective measures, including nominal devaluation and several alternative approaches, are then evaluated.

Assessing Competitiveness Using Industry Unit Labor Costs

International Monetary Fund
Assessing Competitiveness Using Industry Unit Labor Costs Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 60 pages
File Size : 45,8 Mb
Release : 2012-04-01
Category : Business & Economics
ISBN : 9781475587739

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Assessing Competitiveness Using Industry Unit Labor Costs by International Monetary Fund Pdf

Conceptual ambiguities and statistical weaknesses hamper the assessment of external competitiveness. The term competitiveness, while applied extensively, is often imprecisely defined, which can result in analytical errors and mistaken policy advice. Furthermore, aggregate statistical measures of competitiveness in terms of exchange rate misalignment can be biased. To address these issues, this paper makes two contributions. First, it clarifies the external competitiveness concept, highlighting the dichotomy between productivity-driven long-run growth and short-run deviations from the underlying growth trajectory, which can be related to exchange rate misalignment. Second, it develops a disaggregated statistical approach for examining competitiveness based on unit labor costs at the three digit industry level in a group of comparable countries. The case of Slovakia is used to illustrate these concepts, but the analytical insights have general application.

Real Exchange Rate Misalignment: A Panel Co-Integration and Common Factor Analysis

Etienne B. Yehoue,Gilles J. Dufrénot
Real Exchange Rate Misalignment A Panel Co Integration and Common Factor Analysis Book PDF

Author : Etienne B. Yehoue,Gilles J. Dufrénot
Publisher : INTERNATIONAL MONETARY FUND
Page : 39 pages
File Size : 54,6 Mb
Release : 2005-08-01
Category : Developing countries
ISBN : 1451861834

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Real Exchange Rate Misalignment: A Panel Co-Integration and Common Factor Analysis by Etienne B. Yehoue,Gilles J. Dufrénot Pdf

We combine some newly developed panel co-integration techniques and common factor analysis to analyze the behavior of the real exchange rate (RER) in a sample of 64 developing countries. We study the dynamic of the RER with its economic fundamentals: productivity, the terms of trade, openness, and government spending. We derive a number of common factors that explain the dynamic of the RER in our sample. We find that while some fundamentals such as productivity, terms of trade, and openness are strongly related to these common factors in low-income countries, no such link is found for the middle-income countries. We also derive the misalignment indices, which seem to reproduce recent episodes of overvaluation and undervaluation in a number of countries.

Is the Parallel Market Premium a Reliable Indicator of Real Exchange Rate Misalignment in Developing Countries

Mr.Peter Montiel,Mr.Jonathan David Ostry
Is the Parallel Market Premium a Reliable Indicator of Real Exchange Rate Misalignment in Developing Countries Book PDF

Author : Mr.Peter Montiel,Mr.Jonathan David Ostry
Publisher : International Monetary Fund
Page : 26 pages
File Size : 43,6 Mb
Release : 1993-08-01
Category : Business & Economics
ISBN : 9781451960358

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Is the Parallel Market Premium a Reliable Indicator of Real Exchange Rate Misalignment in Developing Countries by Mr.Peter Montiel,Mr.Jonathan David Ostry Pdf

It is often argued that the parallel market premium is a useful indicator of real exchange rate misalignment in developing countries. The empirical evidence does not, however, suggest the existence of a robust correlation between these two endogenous variables that is independent of the nature of economic shocks and various structural relationships in the economy. This paper presents an analytical investigation of the reliability of the parallel market premium as an indicator of real exchange rate misalignment in the context of a fully optimizing model of a developing country. The analysis suggests that one should exercise caution in drawing inferences about the sign and magnitude of real exchange rate misalignment from the parallel market premium.

Exchange Rate Misalignment

Lawrence E. Hinkle,Peter J. Montiel,Peter Montiel
Exchange Rate Misalignment Book PDF

Author : Lawrence E. Hinkle,Peter J. Montiel,Peter Montiel
Publisher : World Bank Publications
Page : 638 pages
File Size : 46,7 Mb
Release : 1999
Category : Business & Economics
ISBN : 9780195211269

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Exchange Rate Misalignment by Lawrence E. Hinkle,Peter J. Montiel,Peter Montiel Pdf

The study cautiously identifies exchange rate misalignment as an important element in most of the exchange rate crises that plagued the developing world during the last decade. Given that the increasing integration of world capital markets, has escalated the costs of such crises, a broad consensus emerged in recent years, that the overriding objective of exchange rate policy in developing countries, should be to avoid episodes of prolonged, and substantial misalignment, i.e., situations in which the actual real exchange rate differs significantly from its long-run equilibrium value. It was the Bank's involvement in one such misalignment episode, that eventually led to this book. Following an overview on the concepts and measurement of exchange rate misalignment, its impact on the purchasing power parity, and the relationship between the external real exchange rate (RER), and the two-good internal RER for tradables non-tradables, the study presents methodologies - empirical applications - for estimating the RER equilibrium. The study reaches an optimistic conclusion - that enough is known to identify cases of misalignment, and be able to sound clear warning signals. The implication for exchange rate policy is that ignorance about the empirical value of the equilibrium exchange rate, cannot be used to clinch arguments for extreme exchange arrangements, such as clean floats, currency boards, and "dollarization."

External Performance in Low-Income Countries

Mr.Alessandro Prati,Mr.Luca Antonio Ricci,Lone Engbo Christiansen,Mr.Stephen Tokarick,Mr.Thierry Tressel
External Performance in Low Income Countries Book PDF

Author : Mr.Alessandro Prati,Mr.Luca Antonio Ricci,Lone Engbo Christiansen,Mr.Stephen Tokarick,Mr.Thierry Tressel
Publisher : International Monetary Fund
Page : 72 pages
File Size : 50,8 Mb
Release : 2011-03-15
Category : Business & Economics
ISBN : 9781616350536

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External Performance in Low-Income Countries by Mr.Alessandro Prati,Mr.Luca Antonio Ricci,Lone Engbo Christiansen,Mr.Stephen Tokarick,Mr.Thierry Tressel Pdf

Assessments of exchange rate misalignments and external imbalances for low-income countries are challenging because methodologies developed for advanced and emerging economies cannot be automatically applied to poorer nations. This paper uses a large database, unique in the set of indicators and number of countries it covers, to estimate the relationship in low-income countries between a set of fundamentals in the medium to long term and the real effective exchange rate, the current account, and the net external assets position.

External Balance in Low Income Countries

Mr.Thierry Tressel,Lone Engbo Christiansen,Mr.Alessandro Prati,Mr.Luca Antonio Ricci
External Balance in Low Income Countries Book PDF

Author : Mr.Thierry Tressel,Lone Engbo Christiansen,Mr.Alessandro Prati,Mr.Luca Antonio Ricci
Publisher : International Monetary Fund
Page : 54 pages
File Size : 41,8 Mb
Release : 2009-10-01
Category : Business & Economics
ISBN : 9781451873689

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External Balance in Low Income Countries by Mr.Thierry Tressel,Lone Engbo Christiansen,Mr.Alessandro Prati,Mr.Luca Antonio Ricci Pdf

This paper offers a coherent empirical analysis of the determinants of the real exchange rate, the current account, and the net foreign assets position in low income countries. The paper focuses on indicators specific to low income countries, such as the quality of policies and institutions, the special access to official external financing, and the role of shocks. In addition to more standard factors, we find that domestic financial liberalization is associated with higher current account balances and net foreign asset positions, while capital account liberalization is associated with lower current account balances and net foreign asset positions and with more appreciated real exchange rates. Negative exogenous shocks tend to raise (reduce) the current account in countries with closed (opened) capital accounts. Finally, foreign aid is progressively absorbed over time through net imports, and is associated with a more depreciated real exchange rate in the long-run.

Real Exchange Rates, Economic Complexity, and Investment

Steve Brito,Mr.Nicolas E Magud,Mr.Sebastian Sosa
Real Exchange Rates Economic Complexity and Investment Book PDF

Author : Steve Brito,Mr.Nicolas E Magud,Mr.Sebastian Sosa
Publisher : International Monetary Fund
Page : 21 pages
File Size : 46,9 Mb
Release : 2018-05-10
Category : Business & Economics
ISBN : 9781484356340

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Real Exchange Rates, Economic Complexity, and Investment by Steve Brito,Mr.Nicolas E Magud,Mr.Sebastian Sosa Pdf

We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms.

The Real Exchange Rate

Jan Gottschalk,Carl Miller,Lanieta Rauqeuqe,Isoa Wainiqolo,Yongzheng Yang
The Real Exchange Rate Book PDF

Author : Jan Gottschalk,Carl Miller,Lanieta Rauqeuqe,Isoa Wainiqolo,Yongzheng Yang
Publisher : International Monetary Fund
Page : 31 pages
File Size : 41,5 Mb
Release : 2016-08-08
Category : Business & Economics
ISBN : 9781475523973

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The Real Exchange Rate by Jan Gottschalk,Carl Miller,Lanieta Rauqeuqe,Isoa Wainiqolo,Yongzheng Yang Pdf

This paper provides an assessment of real exchange rate measures and their impact on trade performance with special reference to two Pacific island countries, Fiji and Samoa. The analysis shows that the commonly used CPI-based real effective exchange rate (REER) measure provides a useful starting point of assessment, but alternative measures based on other price and cost indices should be used to check the robustness of the results, particularly given the large impact of global commodity prices on small open economies. The paper also offers some illustrations of how to quantify the impact of exchange rate movements on trade, especially in the face of data constraints in small open economies.

External Assessments in Special Cases

Anna Ter-Martirosyan,Ms.Sally F. (Sally Fangnan) Chen,Mr.Lawrence Dwight,Ms.Mwanza Nkusu,Mr.Mehdi Raissi,Ms.Ashleigh Watson
External Assessments in Special Cases Book PDF

Author : Anna Ter-Martirosyan,Ms.Sally F. (Sally Fangnan) Chen,Mr.Lawrence Dwight,Ms.Mwanza Nkusu,Mr.Mehdi Raissi,Ms.Ashleigh Watson
Publisher : International Monetary Fund
Page : 61 pages
File Size : 48,6 Mb
Release : 2014-01-17
Category : Business & Economics
ISBN : 9781475554687

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External Assessments in Special Cases by Anna Ter-Martirosyan,Ms.Sally F. (Sally Fangnan) Chen,Mr.Lawrence Dwight,Ms.Mwanza Nkusu,Mr.Mehdi Raissi,Ms.Ashleigh Watson Pdf

External Assessments in Special Cases presents the pilot External Balances Assessment methodology developed by IMF staff for estimating current account and exchange rate gaps for a group of advanced and emerging market economies, and discusses modifications to take account of special cases. Different approaches to external assessments for countries with special circumstances are evaluated, and some tools presented that could be used to inform sound judgment on the part of those conducting such assessments.

The CFA Franc Zone

Ms.Anne Marie Gulde,Mr.Charalambos G. Tsangarides
The CFA Franc Zone Book PDF

Author : Ms.Anne Marie Gulde,Mr.Charalambos G. Tsangarides
Publisher : International Monetary Fund
Page : 411 pages
File Size : 45,9 Mb
Release : 2008-04-02
Category : Business & Economics
ISBN : 9781589066755

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The CFA Franc Zone by Ms.Anne Marie Gulde,Mr.Charalambos G. Tsangarides Pdf

About one-third of countries covered by the IMF's African Department are members of the CFA franc zone. With most other countries moving away from fixed exchange rates, the issue of an adequate policy framework to ensure the sustainability of the CFA franc zone is clearly of interest to policymakers and academics. However, little academic research exists in the public domain. This book aims to fill this void by bringing together work undertaken in the context of intensified regional surveillance and highlighting the current challenges and the main policy requirements if the arrangements are to be carried forward. The book is based on empirical research by a broad group of IMF economists, with contributions from several outside experts.

Republic of Congo

International Monetary Fund
Republic of Congo Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 38 pages
File Size : 40,5 Mb
Release : 2009-02-25
Category : Business & Economics
ISBN : 9781451951967

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Republic of Congo by International Monetary Fund Pdf

This Selected Issues Paper for the Republic of Congo discusses economic development and policies. Domestic prices of refined petroleum products are administratively set by the authorities below import parity. Non-oil revenue in 2007 has remained about 20 percent of non-oil GDP, compared with overall fuel subsidies of about 8.3 percent of non-oil GDP. The fuel pricing policy and subsidy scheme have been established by the authorities to protect low-income households from rising energy prices.

Misalignment of Exchange Rates

Richard C. Marston
Misalignment of Exchange Rates Book PDF

Author : Richard C. Marston
Publisher : University of Chicago Press
Page : 332 pages
File Size : 44,5 Mb
Release : 2008-04-15
Category : Business & Economics
ISBN : 9780226507255

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Misalignment of Exchange Rates by Richard C. Marston Pdf

Economists writing on flexible exchange rates in the 1960s foresaw neither the magnitude nor the persistence of the changes in real exchange rates that have occurred in the last fifteen years. Unexpectedly large movements in relative prices have lead to sharp changes in exports and imports, disrupting normal trading relations and causing shifts in employment and output. Many of the largest changes are not equilibrium adjustments to real disturbances but represent instead sustained departures from long-run equilibrium levels, with real exchange rates remaining "misaligned" for years at a time. Contributors to Misalignment of Exchange Rates address a series of questions about misalignment. Several papers investigate the causes of misalignment and the extent to which observed movements in real exchange rates can be attributed to misalignment. These studies are conducted both empirically, through the experiences of the United States, Great Britain, Japan, and the countries of the European Monetary System, and theoretically, through models of imperfect competition. Attention is then turned to the effects of misalignment, especially on employment and production, and to detailed estimates of the effects of changes in exchange rates on several industries, including the U.S. auto industry. In response to the contention that there is significant "hysteresis" in the adjustment of employment and production to changes in exchange rates, contributors also attempt to determine whether the effects of misalignment can be reversed once exchange rates return to earlier levels. Finally, the issue of how to avoid—or at least control—misalignment through macroeconomic policy is confronted.

Malawi

International Monetary Fund
Malawi Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 140 pages
File Size : 53,7 Mb
Release : 2012-08-03
Category : Business & Economics
ISBN : 9781475509731

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Malawi by International Monetary Fund Pdf

The Malawian economy is slowly recovering, thanks to corrective measures such as the floating exchange rate regime and liberated current account transactions. Stringent fiscal discipline, restrained monetary policies, and boosting of international reserves have been suggested as measures for controlling inflation and stabilizing the macroeconomy. Operation power and freedom for results-based management (RBM) and implementation of Malawi Growth and Development Strategy II (MGDS-II) are also suggested by the Executive Board. Measures to ensure revenue gain concurrent with spending have also been recommended.