## Real Exchange Rates and Fundamentals: A Cross-Country Perspective

_IMF Working Papers, January 1, 2008_

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**Canonical URL:** [Real Exchange Rates and Fundamentals: A Cross-Country Perspective](https://www.imf.org/en/publications/wp/issues/2016/12/31/real-exchange-rates-and-fundamentals-a-cross-country-perspective-21425)

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## Bibliographic details
- Authors: Luca A Ricci, Jaewoo Lee, Gian M Milesi-Ferretti
- Published: January 1, 2008
- Series: IMF Working Papers

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### Overview
- Authors: Luca A Ricci, Jaewoo Lee, Gian M Milesi-Ferretti
- Date: January 1, 2008
- Core objective: Estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals using newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade.
- Sample: 48 industrial countries and emerging markets.

### Key findings
- There is 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 tend to be associated with appreciating real exchange rates.
- Increases in government consumption tend to be associated with appreciating real exchange rates.

### Data, methodology, and scope
- Measures constructed: productivity differentials, external imbalances, commodity terms of trade.
- Empirical approach: panel cointegrating relationship between real exchange rates and fundamentals.
- Exchange rate measure emphasized: CPI-based real exchange rate.
- Country coverage: 48 industrial countries and emerging markets.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/real-exchange-rates-and-fundamentals-a-cross-country-perspective-21425_