A Darwinian Perspective on 'Exchange Rate Undervaluation'
Asian Development Bank
Asian Development Bank Economics Working Paper Series No. 456
This paper studies how status competition for marriage partners can generate surprising effects on the real exchange rate (RER). In theory, a rise in the sex ratio (increasing relative surplus of men) can generate a decline in the RER. The effect can be quantitatively large if the biological desire for a marriage partner is strong. We also provide within-the People’s Republic of China and cross-country empirical evidence to support the theory. As an application, our cross-country estimation suggests that sex ratio as well as other factors in the existing literature can account for the recent evolution in Chinese RER almost completely.
Number of Pages in PDF File: 67
Keywords: currency manipulation, equilibrium real exchange rate, surplus men
JEL Classification: F3, F4, J1, J7
Date posted: December 29, 2015