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A Darwinian Perspective on 'Exchange Rate Undervaluation'

Qingyuang Du

Monash University

Shang-Jin Wei

Asian Development Bank

October 2015

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

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Date posted: December 29, 2015  

Suggested Citation

Du, Qingyuang and Wei, Shang-Jin, A Darwinian Perspective on 'Exchange Rate Undervaluation' (October 2015). Asian Development Bank Economics Working Paper Series No. 456. Available at SSRN: https://ssrn.com/abstract=2708821 or http://dx.doi.org/10.2139/ssrn.2708821

Contact Information

Qingyuang Du
Monash University ( email )
Wellington Road
Victoria, Roodepoort 3145
Shang-Jin Wei (Contact Author)
Asian Development Bank ( email )
6 ADB Avenue, Mandaluyong City 1550
Metro Manila

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