Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia

43 Pages Posted: 12 May 2010  

Juthathip Jongwanich

Asian Development Bank

Date Written: March 1, 2009

Abstract

This paper examines the equilibrium real exchange rate and real exchange rate misalignments in developing Asian countries during the period 1995-2008. In addition, the relationship between real exchange rate misalignment and export performance is investigated. In the lead-up to the 1997-1998 financial crisis, real exchange rate exhibited persistent overvaluation in the crisis-affected countries. After the crisis, real exchange rate undervaluation was evident in many Asian countries such as People’s Republic of China (PRC), Malaysia, and Thailand. This study also shows that real exchange rate misalignment could have a negative impact on export performance in developing Asia. With its implications on economic activity, monitoring real exchange rate equilibrium and misalignment is a useful tool for governments/central banks to ensure balance in the economy.

Keywords: Open Macroeconomics, Real Exchange Rate, Exports East and Southeast Asia

JEL Classification: F41, F12, O11, O53

Suggested Citation

Jongwanich, Juthathip, Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia (March 1, 2009). Asian Development Bank Economics Research Paper Series No. 151. Available at SSRN: https://ssrn.com/abstract=1604839 or http://dx.doi.org/10.2139/ssrn.1604839

Juthathip Jongwanich (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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