Real and Monetary Determinants of Real Exchange Rate Behavior: Theory and Evidence From Developing Countries / Sebastian Edwards.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2721.

NBER working paper series no. w2721

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Real and Monetary Determinants of Real Exchange Rate Behavior

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

This paper develops a dynamic model of real exchange rate behavior in developing countries. A three goods economy (exportables, importables and nontradables) is considered. Residents of this country hold domestic and foreign assets, and there is a dual exchange rate regime. There is a government that consumes importables and nontradables. A distinction is made between equilibrium and disequilibrium movements of the RER. The determinants of real exchange rate misalignment are studied with emphasis placed on the role of devaluations and balance of payments crisis. The implications of the model are tested using data for 12 developing countries. The results obtained are generally favorable for the model. The issue of RER stationarity is also analyzed.

Notes:

Print version record

September 1988.