A Darwinian Perspective on 'Exchange Rate Undervaluation'
67 Pages Posted: 29 Dec 2015
Date Written: October 2015
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.
Keywords: currency manipulation, equilibrium real exchange rate, surplus men
JEL Classification: F3, F4, J1, J7
Suggested Citation: Suggested Citation