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Global Value Chains and Effective Exchange Rates at the Country‐Sector Level

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  • NIKHIL PATEL
  • ZHI WANG
  • SHANG‐JIN WEI

Abstract

The real effective exchange rate (REER) is one of the most cited statistics in open‐economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within a country participate in international production sharing at different stages, sector‐level variations are also important for determining competitiveness. Incorporating these features, we develop a framework to compute REER at both the sector and country level and apply it on intercountry input‐output tables to study the properties of the new measures.

Suggested Citation

  • Nikhil Patel & Zhi Wang & Shang‐Jin Wei, 2019. "Global Value Chains and Effective Exchange Rates at the Country‐Sector Level," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(S1), pages 7-42, December.
    • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:s1:p:7-42
    DOI: 10.1111/jmcb.12670
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization

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