TY  - JOUR
AU  - Razin,Ofair
AU  - Collins,Susan M.
TI  - Real Exchange Rate Misalignments and Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6174
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6174
L1  - http://www.nber.org/papers/w6174.pdf
N1  - Author contact info:
Susan M. Collins
Joan and Sanford Weill Dean of Public Policy
Gerald R. Ford School of Public Policy
Weill Hall, Suite 4300
735 South State Street
Ann Arbor, MI   48109-3091
Tel: 734-763-2258
Fax: 734-763-9181
E-Mail: smcol@umich.edu
AB  - Real exchange rate (RER) misalignment is now a standard concept in international macroeconomic theory and policy. However, there is neither a consensus indicator of misalignment, nor an agreed upon methodology for constructing such an indicator.  This paper constructs an indicator of RER misalignment for a large sample of developed and developing countries.  This indicator is based on a well-structured but simple extension of an IS-LM model of an open economy.  The paper then uses regression analysis to explore whether RER misalignments are related to country growth experiences. Interestingly the work finds that there are important non-linearities in the relationship.  Only very high over-valuations" appear to be associated with slower economic growth, while moderate to high (but not very high) under-valuations appear to be associated with more rapid economic growth.
ER  -