Exchange Rate Analysis in Support of IMF Surveillance : A Collection of Empirical Studies

Charalambos Tsangarides, Carlo Cottarelli, Gian Milesi-Ferretti, and Atish Ghosh

• Publisher: INTERNATIONAL MONETARY FUND
• Year: 2008
• eBook ISBN: 9781589067288

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Contents

Foreword

Acknowledgments

Introduction

I Determination and Impact of the Real Exchange Rate

1. Commodity Currencies and the Real Exchange Rate

Paul Cashin, Luis F. Céspedes, and Ratna Sahay

Theoretical Framework

Data

Empirical Analysis of Comovement

Conclusions

Appendix 1.1 Details of the Theoretical Framework

Appendix 1.2 Description of the Data

Appendix 1.3 Construction of the Country-Specific Nominal Price Indices of Commodity Exports

Appendix 1.4 Cointegration Tests: Real Exchange Rate and Real Commodity Prices, Commodity-Exporting Countries, 1980–1980

References

2. Exchange Rates and Trade Balance Adjustment in Emerging Market Economies

Atish Ghosh, Alun Thomas, Juan Zalduendo, Luis Catão, Bikas Joshi, Uma Ramakrishnan, and Lupin Rahman

The Analytics of Trade Balance Adjustment

Country Classification and Estimation Strategy

Empirical Results

Conclusions

Appendix 2.1 Overview of the Empirical Literature on Trade Volume Price Elasticities and Pricing to Market

Appendix 2.2 Marshall-Lerner Redux

Appendix 2.3 Data Description and Sample

Appendix 2.4 Robustness Tests

Appendix 2.5 Estimation Procedures

References

3. Aid Volatility and Macroeconomic Policies

Alessandro Prati and Thierry Tressel

Empirical Evidence

Conclusions

References

4. Exchange Rate Pass-Through in the Euro Area

Hamid Faruqee

Empirical Estimates

Model of Incomplete Pass-Through

Matching Theory and Empirics

Conclusions

Appendix 4.1 Stationarity, Causality, and Sensitivity Analysis

References

II Assessing Competitiveness and the Equilibrium Real Exchange Rate in Specific Countries or Country Groups

5. Estimation of the Equilibrium Real Exchange Rate for South Africa

Ronald MacDonald and Luca Antonio Ricci

Brief Review of the Literature

Data and Methodology

Econometric Results and Their Robustness

Equilibrium Real Exchange Rate

Conclusions

Appendix 5.1 Variables: Definitions and Sources

References

6. France, Germany, Italy, and Spain: Explaining Differences in External Sector Performance Among Large Euro Area Countries

Céline Allard, Mario Catalán, Luc Everaert, and Silvia Sgherri

Developments in Key Determinants of Trade

Econometric Analysis

Concluding Remarks and Implications

Appendix 6.1 Data Sources

Appendix 6.2 Error Correction Model for Trade Equations and Cointegration Tests

Appendix 6.3 Principle of Dynamic Contributions

References

7. Maintaining Competitiveness in the Global Economy

Catriona Purfield

Export Performance

Exchange Rate and Competitiveness

Developments in the Real Effective Exchange Rate

Determinants of the Real Effective Exchange Rate

Outlook for India’s Export Competitiveness

Conclusions

References

8. Modeling the Real Exchange Rates in WAEMU and CEMAC

Yasser Abdih and Charalambos Tsangarides

Theory and Empirical Formulation

Empirical Methodology

Cointegration Analysis

Estimation of Equilibrium

Concluding Remarks

Appendix 8.1 Variable Definitions and Sources

Appendix 8.2 Data, Test Diagnostics, and Results

References

III Considerations in Choice of Exchange Rate Regime

9. To Peg or Not to Peg: A Template for Assessing the Nobler

Aasim M. Husain

De Facto Regimes in Kazakhstan and Pakistan

Template

Scorecard

Conclusions

References

10. Exits from Heavily Managed Exchange Rate Regimes: How Good Has the Going Been?

Enrica Detragiache, Ashoka Mody, and Eisuke Okada

The Frequency and Features of Orderly and Disorderly Exits

Determinants of Exits

Results

A Review of the Literature

Conclusions

Appendix 10.1 Explanatory Variables in the Study

References

11. Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis

Grace Juhn and Paolo Mauro

A Word on Theories of Exchange Rate Regime Choice

Review of Previous Empirical Findings

Exchange Rate Regime Classifications, Data, and Estimation Strategy

Results

Concluding Remarks

References

List of Abbreviations

Contributors

Figures

1.1 Real Exchange Rate and Real Commodity Price, Selected Commodity-Exporting Countries, 1980–2002

2.1 Price Deflators, 1980–1980

2.2 Profiles for Exports, Imports, and Trade Balances

2.3 Effect of a Depreciation on the Trade Balance

4.1 Effects of Exchange Rate Shock on Euro Area Prices

4.2 Pricing Behavior of Domestic and Foreign Firms

4.3 Empirical and Theoretical Impulse Response Paths for the Euro Area

5.1 Real Effective Exchange Rate, 1970:Q1–1:Q1

5.2 Determinants of Real Effective Exchange Rate, 1970–2002

5.3 Real Effective Exchange Rate

6.1 Export Unit Values

6.2 Real Effective Exchange Rates, Productivity, and Wages

6.3 Growth Rate of World Demand

6.4 Growth Rate of Domestic Demand

6.5 Accounting for Country Differences in Trade Growth

6.6 France: Dynamic Contributions of Various Factors to Exports and Imports, 1999–1999

6.7 Germany: Dynamic Contributions of Various Factors to Exports and Imports, 1999–1999

6.8 Italy: Dynamic Contributions of Various Factors to Exports and Imports, 1999–1999

6.9 Spain: Dynamic Contributions of Various Factors to Exports and Imports, 1999–1999

7.1 World Market Position of Indian Exports, 1990–1990

7.2 India’s Export Performance Relative to Other Asian Countries

7.3 IMD Competitiveness Indicators, 2005

7.4 CPI-Based Real Effective Exchange Rate and Its Components

7.5 RBI Five-Country REER and IMF Revised REER Measure

7.6 Specification 1: Actual and Estimated CPI-Based REER

7.7 Specification 2: Estimates of the Equilibrium REER

7.8 Effective Exchange Rate Flexibility

8.1 Actual and Hodrick-Prescott Equilibrium Real Effective Exchange Rates

8.2 Actual and Gonzalo-Granger Equilibrium Real Effective Exchange Rates

8.3 Estimated Misalignment Episodes

8.A.1 Cointegration Variables

8.A.2 Exchange Rates and Relative Prices

8.A.3 Real Effective Exchange Rates of Member Countries

8.A.4 Model Stability Tests

8.A.5 Impulse Response Functions

9.1 Degree of Flexibility of Rupee and Tenge

9.2 Trade Orientation

9.3 Financial Integration

9.4 Diversification

9.5 Stabilization

9.6 Credibility

9.7 Fear-of-Floating Effects

10.1 Exits by Duration

Tables

1.1 Principal Commodity Exports and Percentage Share of Primary Commodities in Total Exports, 1991–1991

1.2 Cointegration and Stability Tests, Real Exchange Rate and Real Commodity Prices, 1980–1980

1.3 Real Exchange Rate and Real Commodity Prices: Exogeneity and Causality, 1980–1980

2.1 Export Volumes: Coefficient Estimates and Implied Elasticities

2.2 Pricing Equation for Manufacturing Exporters: Coefficient Estimates and Implied Elasticities

2.3 Inflation Rate: Coefficient Estimates and Implied Elasticities

2.4 Volume of Imports and Absorption: Coefficient Estimates and Implied Elasticities

2.5 Effects of Devaluations on Export-Import Values and on the Trade Balance for Different Classes of Exporters

2.A.1 Estimates of Price Elasticities in Selected Papers

2.A.2 Country Sample

2.A.3 Export Volumes (Long-Run Elasticities) in Different Samples

2.A.4 Inflation Equation: Effect of a Change in Exchange Rates

2.A.5 Impact on the Trade Balance of a 10 Percent Depreciation

2.A.6 Pricing Equation for Manufacturing Exporters for Different Samples

2.A.7 Pricing Equation for Imports

2.A.8 Trade Elasticities and Estimation Methodologies

2.A.9 Long-Run Effects of Devaluations on Export-Import Values and on the Trade Balance (in Foreign Currency) for Different Classes of Exporters

3.1 The Sample

3.2 Summary Statistics

3.3 Bivariate Correlations Among Main Variables

3.4 Foreign Aid and Trade Balance Volatility

4.1 Euro Area Pass-Through Elasticities

4.2 Pass-Through Ela...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Content Page
• Foreword
• Acknowledgments
• Introduction
• I Determination and Impact of the Real Exchange Rate
• II Assessing Competitiveness and the Equilibrium Real Exchange Rate in Specific Countries or Country Groups
• III Considerations in Choice of Exchange Rate Regime
• List of Abbreviations
• Contributors
• Figures
• Footnotes