Evaluating Historical CGER Assessments: How Well Have They Predicted Subsequent Exchange Rate Movements?
IMF Working Papers, February 1, 2009
Source details
- Canonical URL
- Evaluating Historical CGER Assessments: How Well Have They Predicted Subsequent Exchange Rate Movements?
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Bibliographic details
- Authors: Jungjin Lee, Abdul d Abiad, Prakash Kannan
- Published: February 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871791.001
Summary findings
- The IMF's Consultative Group on Exchange Rate issues (CGER) conducted exchange rate assessments as part of the surveillance process since 1997.
- This paper evaluates CGER assessments from 1997 to 2006 by comparing these to subsequent movements in real effective exchange rates (REER).
- CGER's estimated misalignments have predictive power over future REER movements, especially:
- over longer horizons, and
- after changes in fundamentals are accounted for.
- CGER misalignments frequently predict the direction of currency movements correctly.
- Misalignments have tended to be persistent, resulting in systematic errors:
- overprediction for undervalued currencies, and
- underprediction for overvalued currencies.
Subject and keywords
- Subjects: Currencies; Exchange rate assessments; Exchange rates; Real effective exchange rates; Real exchange rates
- Keywords: interest rate; random walk; WP
Source: IMF Working Paper — "Evaluating Historical CGER Assessments: How Well Have They Predicted Subsequent Exchange Rate Movements?" by Jungjin Lee, Abdul d Abiad, and Prakash Kannan (February 1, 2009).
Content in this bundle
- _wp0932 — Box 1: An Overview of CGER Exchange Rate Assessment Methodologies