Value-Added Exchange Rates / Rudolfs Bems, Robert C. Johnson.

Format:

Book

Author/Creator:

Bems, Rudolfs.

Contributor:

National Bureau of Economic Research.

Johnson, Robert C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18498.

NBER working paper series no. w18498

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

This paper updates the conceptual foundations for measuring real effective exchange rates (REERs) to allow for vertical specialization in trade. We derive a value-added REER describing how demand for the value added that a country produces changes as the price of its value added changes relative to competitors. We then compute this index for 42 countries from 1970-2009 using trade measured in value added terms and GDP deflators. There are substantial differences between value-added and conventional REERs. For example, China's value-added REER appreciated by 20 percentage points more than the conventional REER from 2000-2009. These differences are driven mainly by the theory-motivated shift in prices used to construct the value-added REER, not changes in bilateral weights.

Notes:

Print version record

October 2012.