Real Exchange Rates in the Developing Countries:  Concepts and Measure- ment

Edwards, Sebastián

doi:10.3386/w2950

Cited by 58 publications

(51 citation statements)

References 9 publications

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“…In turn, this induces the need to generate a depreciation in the real exchange rate. However, Edwards (1989b) has shown that these initial theoretical approaches were too simplistic. He has argued that a trade liberalization does not have an unambiguous effect, since there are two different effects at work, a substitution and an income effect, that operate in opposite directions.…”

Section: Trade Opennessmentioning

confidence: 99%

Does trade openness influence the real effective exchange rate? New evidence from panel time-series

Gantman

Dabós

2017

SERIEs

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Using a dataset of 101 countries over the 1960-2011 period, we examine the relationship between the real effective exchange rate (REER), on the one hand, and trade openness, trade balance, the terms of trade, factor productivity, and exchange rate regime, on the other one. We use new econometric estimators that deal with the problems of potential endogeneity and cross-sectional dependence that are present in the data, while also allowing for cross-country heterogeneity in the parameters of interest. The findings of the study strongly support the hypothesis that an increase in trade openness produces a depreciation of the REER. The other variables considered in the analysis-factor productivity, trade balance, terms of trade, and exchange rate regime-do not have a statistically significant effect that is robust to different sample compositions and alternative statistical estimators.

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Section: Trade Opennessmentioning

confidence: 99%

Does trade openness influence the real effective exchange rate? New evidence from panel time-series

Gantman

Dabós

2017

SERIEs

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“…The BEER approach -in a similar fashion than Williamson's (1994) fundamental equilibrium exchange rate (FEER) approach [9], explains the real exchange rate behaviour in terms of economic fundamentals using * Internal balance means that the economy operates at the full-capacity output, while the external balance refers to the current account sustainability.…”

Section: Literature Reviewmentioning

confidence: 99%

“…IFS (IMF) 2017. Theoretically, the influence of terms of trade on the REER cannot be signed a priori, as this depends on whether income or substitution effects dominate [8,9].…”

Section: Lreer Lbse Lopen Ltotmentioning

confidence: 99%

“…Edwards extends the inter-temporal general equilibrium model to a small open economy with optimizing consumers and producers [6,9], and analyses the relationship between terms of trade shocks and current account. He emphasizes the role of non-traded goods in the transmission process and how the terms of trade disturbances influence the current account.…”

Section: The Edwards' (1987) Modelmentioning

confidence: 99%

“…However, while terms of trade fluctuations have been considered a key determinant of developing country real exchange rates [8,9].…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015

Yahia¹,

Djeddi²,

Louafi³

2017

JFE

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The aim of this paper is to estimate the long-run Equilibrium Real Exchange Rate (ERER) path using VECM approach, and assesses the degree of misalignment in Algeria. Based on annual data from 1980 to 2015, our results show that the macroeconomic variables such as terms of trade, trade openness, differential productivity with trading partners (Balassa-Samuelson effect), real price of oil, and government expenditures, plays significant role in determining the equilibrium of Algeria's ERER, the results also reveal that Algerian economy suffered from RER misalignment. As finding, and according to the Edwards' [6] Model and the Cashin's [2] model, results showed same evidences that there are three episodes of undervaluation of the Algerian dinar's and also three episodes of overvaluation, the seventh episode (2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015) shows that the Actual ERER appears to have been close to its estimated equilibrium.

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Exchange rate dynamics of emerging and developing economies: Not all capital flows are alike

Nguyen

Nasir

2022

Int. J Fin Econ

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The increasing cross-border capital flows have raised the question of whether capital inflows and outflows have different impacts on exchange rates in emerging markets than they do in developed markets and economies. To explore the potential heterogeneity in the impacts that can arise from the different types and directions of capital flows, we classify them according to whether they involve foreign direct investment (FDI) or foreign portfolio investment (FPI) and examine these inflows and outflows separately. The characteristics of these different types of capital flows and their effects on the real exchange rate in both advanced and emerging markets during 2002-2017 are investigated using a set of estimation approaches. To capture the relationship between real exchange rates and capital flows while controlling for other variables, a dynamic panel data model is utilized for the dataset covering emerging countries. Key findings suggest that the composition of capital flows determines the impact of those flows on real exchange rates, whereby FPI brings a faster appreciation of the real exchange rate than FDI and capital outflows bring a sharper degree of exchange rate adjustment than capital inflows. F20F30.

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Real Exchange Rates in the Developing Countries: Concepts and Measure- ment

Cited by 58 publications

References 9 publications

Does trade openness influence the real effective exchange rate? New evidence from panel time-series

Does trade openness influence the real effective exchange rate? New evidence from panel time-series

Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015

Exchange rate dynamics of emerging and developing economies: Not all capital flows are alike

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