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Equilibrium Exchange Rates and Misalignments: The Case of Homogenous Emerging Countries

Author

Listed:
  • Christian K. Tipoy

    (School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Africa)

  • Marthinus C. Breitenbach

    (Department of Economics, University of Pretoria, South Africa)

  • Mulatu F. Zerihun

    (Department of Economics, Tshwane University of Technology, South Africa)

Abstract

We compute the exchange rate misalignment for a set of emerging economies between 1980 and 2013 using the behavioural equilibrium exchange rate definition. The real equilibrium exchange rate is constructed using a parsimonious model and estimators that are robust to cross-sectional independence and small sample size bias. We find that these countries tend to intervene to avoid real appreciation of their currencies following a rise in relative productivity, casting doubt on the Balassa-Samuelson effect. East-Asian countries have maintained their currencies at an artificially low level in order to remain competitive and boost economic growth these past years.

Suggested Citation

  • Christian K. Tipoy & Marthinus C. Breitenbach & Mulatu F. Zerihun, 2016. "Equilibrium Exchange Rates and Misalignments: The Case of Homogenous Emerging Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(4), pages 3-25, October-D.
    • Handle: RePEc:spd:journl:v:66:y:2016:i:4:p:3-25
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    References listed on IDEAS

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    More about this item

    Keywords

    equilibrium exchange rate; panel cointegration; autoregressive distributed lag;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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