IMF Working Papers

Deer Hunting: Misalignment, Debt Accumulation, and Desired Equilibrium Exchange Rates

By Mark P. Taylor, Michael J. Artis

June 1, 1993

Preview Citation

Format: Chicago

Mark P. Taylor, and Michael J. Artis Deer Hunting: Misalignment, Debt Accumulation, and Desired Equilibrium Exchange Rates, (USA: International Monetary Fund, 1993) accessed November 8, 2024
Disclaimer: 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

Summary

This paper deals with hysteresis in the desired equilibrium exchange rate (DEER) arising from misalignment. When the actual real exchange rate departs from its DEER value, current account realizations--and consequently, debt service obligations--will differ from those assumed in the initial DEER calculation, necessitating its recomputation. The paper derives a formal expression for this hysteresis effect in the DEER, studies the convergence properties of a system in which the evolution of actual exchange rates depends on the DEER and provides illustrative calculations of its historical significance. Finally, the paper derives and applies rules of thumb for computing the hysteresis effect when considering the rate of approach of an exchange rate to its DEER value.

Subject: Balance of payments, Current account balance, Debt service, Exchange rate adjustments, Exchange rates, External debt, Foreign exchange, Real exchange rates

Keywords: Current account balance, Debt service, DEER adjustment, DEER devaluation, Deer hunting, DEER trajectory, DEER value, Equilibrium exchange rate, Exchange rate, Exchange rate adjustments, Exchange rate movement, Exchange rates, Global, Rate of exchange, Real exchange rates, WP

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1993/048

  • Stock No:

    WPIEA0481993

  • ISBN:

    9781451972269

  • ISSN:

    1018-5941

Notes

This paper deals with hysteresis in the desired equilibrium exchange rate (DEER) arising from misalignment.

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