Approaches to Assessing Currency Misalignment.pptVIP

Approaches to Assessing Currency Misalignment;Outline;Key Point: There Are Many Equilibrium Exch. Rates;Methodologies;Relative PPP;Example: US Dollar (in real terms);Example: US Dollar (nom. terms);Example: Korean Won (nom. terms);Problems;Absolute PPP;The Failure of Absolute PPP;“Penn Effect” and MacParity;Productivity Based Models;Example: China;BEER/DEER or “Kitchen Sink”;Macro Balance and Related Approaches;In-Sample Fit for CA “norms”: Korea Emerging Asia;In-Sample Fit: China;Complications;Many Equil’m Rates: China;Relative PPP (I);Relative PPP (II);Absolute PPP and Uncertainty;Recent Developments;Assets and Adjustment: Gourinchas-Rey;Normalized net exports/net assets;Econometrics;Exchange Rate Adjustment;Approximating G-R(in-sample);Measurement: Divisia vs. geometric?;References;Gourinchas, Pierre-Olivier and Helene Rey, 2005, “International Financial Adjustment.” NBER Working Paper No. 11155 (February). /w11155/ Isard, Peter , Hamid Faruqee, G. Russell Kincaid, Martin Fetherston, 2001, Methodology for Current Account and Exchange Rate Assessments, IMF Occasional Paper No. 209. Lane, Philip and Gian Maria Milesi-Ferretti, 2002, “External Wealth, the Trade Balance, and the Real Exchange Rate,” European Economic Review 46: 1049-71. Pakko, Michael R. and Patricia S. Pollard, 2003, “Burgernomics: A Big Mac? Guide to Purchasing Power Parity,” Review 85(6) Nov.: 9-28. /publications/review/03/11/pakko.pdf