The debt-adjusted real exchange rate

Article Abstract:

The debt-adjusted real exchange rate (DARER) is developed as an alternative to the real exchange rate (RER) or the required real effective exchange rate. This addresses the underestimation of currency overvaluations in a trade- or current-account deficit economy that accepts an influx of short-term capital and finances its deficit through foreign loans. To this end, the performance of the DARER and the RER in forecasting currency devaluations in the Philippines and Thailand were compared.

Economic aspects, Thailand, Philippines, Currency devaluation, Devaluation (Currency)

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Productivity differentials, the relative price of non-tradables and real exchange rates

Article Abstract:

Research was conducted to reconcile the contradiction between the productivity differential model and the panel unit root tests of real exchange rates. A view from another perspective was proposed to explain the coexistence of such findings. Adjustments in supply and demand shocks and traded goods arbitrage are reflected in real exchange rates and price of non-tradables. Effects on real exchange rates were indicated in the Granger causality tests and variance decomposition results.

Econometrics & Model Building, Econometrics, Productivity accounting, Business models

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