China's exchange rate mechanism and the real effective exchange rate

2013 ◽  
Author(s):  
Lei Lei Song
Keyword(s):  
Exchange Rate ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Exchange Rate Mechanism ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Rate Mechanism

scholarly journals Equilibrium Real Exchange Rate and Misalignment: The Sierra Leone Perspective

2021 ◽  
Vol 8 (3) ◽  
pp. 41
Author(s):  
Abu Bakarr TARAWALIE
Keyword(s):  
Exchange Rate ◽  
Sierra Leone ◽  
Government Expenditure ◽  
Unit Root Test ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Long Run Equilibrium

This paper estimates the equilibrium real effective exchange rate and determine the level of exchange rate misalignment in Sierra Leone, for the period 1980 to 2018. The paper utilizes the behavioral equilibrium exchange rate methodology within the Johansen maximum likelihood framework to estimate the long run equilibrium real effective exchange rate. The unit root test result shows that all the variables are integrated of order one, whilst the cointegration test establishes the existence of one cointegrating vector as evidenced by both the Trace and Maximum Eigen Statistics. The normalized long run results reveal that openness, government expenditure and money supply were the most significant determinants of the real effective exchange rate in the long run. Furthermore, the findings reveal that the real effective exchange rate experienced sustained deviation from the long run equilibrium real effective exchange rate during the study period, with episodes of overvaluation and undervaluation. Specifically, the real effective exchange rate was overvalued by 3.69 percent during the period between 1980-1985; undervalued by 1.8 percent between 1986-1997, and overvalued by 0.9 percent between 1998-2004, Thus, the paper reveals episodes of misalignment of the real effective exchange rate. Based on these findings, the study recommends that, the monetary authorities should ensure stability of the exchange rate and maintain price stability, through sterilization of capital flows as well as contain money growth within the statutory limit.

scholarly journals Portfolio Investment Flows, GDP, and Investment in Brazil

2016 ◽  
Vol 8 (12) ◽  
pp. 1
Author(s):  
Roberto Meurer
Keyword(s):  
Exchange Rate ◽  
Correlation Coefficients ◽  
Strong Relationship ◽  
Production Costs ◽  
Real Effective Exchange Rate ◽  
Portfolio Investment ◽  
The Real ◽  
Financial Variables ◽  
Effective Exchange ◽  
Effective Exchange Rate

Foreign portfolio investment (FPI) flows have grown substantially in recent decades, following changes in the international financial system. In Brazil, FPI represented 66% of foreign direct investment between 1995 and 2009, which makes it meaningful to analyze these flows. In this paper, the relationships between FPI flows to Brazil, GDP, investment, and financial variables from 1995 to 2009 are analyzed, employing quarterly data and applying descriptive statistics, correlation coefficients, and Granger causality tests. Results show a positive relationship between flows, GDP, and investment. Relationships between flows and financial variables show a strong relationship between FPI and the real effective exchange rate, which could be one of the channels through which the flows are related to real variables by means of changes in relative domestic and foreign production costs. Expectations about future behavior of the economy seem to be an important explanation for the relationship between flows and the real variables. Because FPI is volatile and this volatility relates to real variables through the real effective exchange rate and the interest rate, there is a case to be made for the implementation of capital controls.

scholarly journals Real Effective Exchange Rate and Trade Balance Adjustment

2019 ◽  
Vol 19 (131) ◽  
pp. 1 ◽  
Author(s):  
Plamen Iossifov ◽  
Xuan Fei
Keyword(s):  
Exchange Rate ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Trade Flows ◽  
Policy Implications ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

There is an ongoing debate in the literature on whether global trade flows have become disconnected from the large real effective exchange rate movements in the wake of the global financial crisis. The question has important policy implications for the role of exchange rates in supporting growth and restoring external balance. In this paper, we use Turkey---a large and open emerging market economy that has experienced sizable swings of the real effective exchange rate---as a case study to test competing hypotheses. Our results lend support to the finding in existing cross-country studies that the real effective exchange rate remains an important determinant of trade flows. But, its effect is not symmetric in secular periods of appreciation and depreciation and is, oftentimes, dwarfed by the impact on trade flows of the income growth differential between trade partners.

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