Real Exchange Rates and Fundamentals: A Cross-Country Perspective
January 1, 2008
Download PDF
More Formats on IMF eLibrary
Order a Print CopyDisclaimer: 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 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.
Subject: Commodity prices, Foreign assets, Productivity, Real effective exchange rates, Real exchange rates
Keywords: exchange rate, GDP, WP
Pages:
25
Volume:
2008
DOI:
---
Issue:
013
Series:
Working Paper No. 2008/013
Stock No:
WPIEA2008013
ISBN:
9781451868753
ISSN:
1018-5941
