Exchange Rate Misalignment Estimates - Sources of Differences
City University of Hong Kong - Department of Economics & Finance; University of California at Santa Cruz - Department of Economics
Kwansei Gakuin University - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)
August 31, 2011
CESifo Working Paper Series No. 3555
We study the differences of currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a country’s participation status in the ICP survey and its data quality – a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The patterns of changes in the estimated degree of misalignment across individual countries, as illustrated by the BRIC economies, are quite variable.
Number of Pages in PDF File: 50
Keywords: Penn effect eegression, data revision, PPP-based data, measurement factors, economic factors
JEL Classification: F310, F410, E010, C310
Date posted: September 1, 2011
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