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Persistent real misalignments and the role of the exchange rate regime

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  • Caputo, Rodrigo

Abstract

We assess, for a sample of 54 economies, the impact of de facto exchange rate regimes on both the persistence of real exchange misalignments and the average rate of real appreciation. We find that a fixed exchange rate regime reduces the speed of the real exchange rate’s convergence to its equilibrium level. It also increases the average appreciation rate, but only in the case of developing economies. In developed countries, the real exchange rate dynamics is inelastic to the exchange rate regime.

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  • Caputo, Rodrigo, 2015. "Persistent real misalignments and the role of the exchange rate regime," Economics Letters, Elsevier, vol. 135(C), pages 112-116.
    • Handle: RePEc:eee:ecolet:v:135:y:2015:i:c:p:112-116
    DOI: 10.1016/j.econlet.2015.08.011
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    4. Kadjatou Dakoure & Mahamadou Diarra & M. Idrissa Ouedraogo, 2023. "Role of the choice of exchange rate regime on real exchange rate misalignments in South Sahara African countries," International Economics and Economic Policy, Springer, vol. 20(3), pages 425-455, July.
    5. Jebeniani, Jihene & Trabelsi, Jamel, 2022. "Effects of the business cycle on real exchange rate misalignments with respect to exchange rate regimes," International Economics, Elsevier, vol. 170(C), pages 92-102.
    6. Cécile Couharde & Carl Grekou, 2016. "Currency Misalignments in emerging and developing countries: reassessing the role of Exchange Rate Regimes," Working Papers hal-04141577, HAL.
    7. Ca’ Zorzi, Michele & Rubaszek, Michał, 2023. "How many fundamentals should we include in the behavioral equilibrium exchange rate model?," Economic Modelling, Elsevier, vol. 118(C).
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    More about this item

    Keywords

    Equilibrium real exchange rate models; Exchange rate regimes; Real exchange rate misalignment; Panel data models;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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