CEPII, Recherche et Expertise sur l'economie mondiale
Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries

Virginie Coudert
Cécile Couharde

 Highlights :

 Abstract :
Pegged exchange rates are often pointed out as more prone to risk of overvaluation, because their real exchange rates have a tendency to appreciate. We check this assumption empirically over a large sample of emerging and developing countries, by using two databases for de facto classifications by Levy-Yeyati and Sturzenegger (2003) and by Reinhart and Rogoff (2004). We assess currency misalignments by estimating real equilibrium exchange rates taking into account a Balassa effect and the impact of net foreign assets. Pegged currencies are shown to be more overvalued than floating ones.

 Keywords : Exchange rate regimes | emerging and developing countries | misalignments

 JEL : F31, F33
CEPII Working Paper
N°2008-07, April 2008

Non Technical Summary

Full text

BibTeX (with abstract),
plain text (with abstract),
RIS (with abstract)

 Fields of expertise

Money & Finance