Misalignment and Managed Exchange Rates: An Application to the Thai Baht

IMF Working Papers, March 1, 2000

Source details

Canonical URL

Misalignment and Managed Exchange Rates: An Application to the Thai Baht

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: G. C. Lim
• Published: March 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451848410.001

Methodology

• Proposes a methodology for analyzing dynamic misalignment in managed exchange rate systems that combines:
  • the estimation approach to modeling the real exchange rate, and
  • the calibration approach to generating the equilibrium real exchange rate.
• Model estimation in the application is conducted using only pre-July 1997 data.
• The analysis focuses on the difference between the evolution of the actual real exchange rate and the generated equilibrium rate, defined as the "misalignment gap."

Application to the Thai baht

• The methodology is applied to the Thai baht.
• The model is estimated using only pre-July 1997 data to assess market expectations reflected in the exchange rate.

Key findings and interpretation

• The misalignment gap (actual real exchange rate minus generated equilibrium rate) reveals the extent to which the market was persistently factoring in an expected depreciation of the Thai baht.
• The paper emphasizes dynamic analysis of misalignment in a managed exchange rate system context.

Subjects and keywords

• Subjects:
  • Exchange rate arrangements
  • Exchange rates
  • Financial services
  • Foreign exchange
  • Interest rate parity
  • Managed exchange rates
  • Real exchange rates
• Keywords:
  • error-correction speed
  • Exchange rate arrangements
  • Exchange rates
  • expectation error
  • integration estimator
  • interest differential
  • Interest rate parity
  • Managed Equilibrium exchange rate
  • managed exchange rate system
  • Managed exchange rates
  • managed rate
  • misalignment
  • policy-managed exchange rate
  • Real exchange rate
  • Real exchange rates
  • simulations
  • single-equation approach
  • spot rate
  • system vector error correction result
  • Thai baht exchange rate
  • time-series analysis
  • trade equation approach
  • WP

Content in this bundle

• Misalignment and Managed Exchange Rates: An Application to the Thai Baht - WP/00/63
  • Misalignment and Managed Exchange Rates: An Application to the Thai Baht - WP/00/63 (Markdown version)
  • Misalignment and Managed Exchange Rates: An Application to the Thai Baht - WP/00/63 (PDF)