scholarly journals Long‐run determinants and misalignments of the real effective exchange rate in the EU

2018 ◽  
Vol 66 (5) ◽  
pp. 649-672 ◽  
Author(s):  
Mariarosaria Comunale
Keyword(s):  
Exchange Rate ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Eu

scholarly journals Equilibrium Real Exchange Rate and Misalignment: The Sierra Leone Perspective

2021 ◽  
Vol 8 (3) ◽  
pp. 41
Author(s):  
Abu Bakarr TARAWALIE
Keyword(s):  
Exchange Rate ◽  
Sierra Leone ◽  
Government Expenditure ◽  
Unit Root Test ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Long Run Equilibrium

This paper estimates the equilibrium real effective exchange rate and determine the level of exchange rate misalignment in Sierra Leone, for the period 1980 to 2018. The paper utilizes the behavioral equilibrium exchange rate methodology within the Johansen maximum likelihood framework to estimate the long run equilibrium real effective exchange rate. The unit root test result shows that all the variables are integrated of order one, whilst the cointegration test establishes the existence of one cointegrating vector as evidenced by both the Trace and Maximum Eigen Statistics. The normalized long run results reveal that openness, government expenditure and money supply were the most significant determinants of the real effective exchange rate in the long run. Furthermore, the findings reveal that the real effective exchange rate experienced sustained deviation from the long run equilibrium real effective exchange rate during the study period, with episodes of overvaluation and undervaluation. Specifically, the real effective exchange rate was overvalued by 3.69 percent during the period between 1980-1985; undervalued by 1.8 percent between 1986-1997, and overvalued by 0.9 percent between 1998-2004, Thus, the paper reveals episodes of misalignment of the real effective exchange rate. Based on these findings, the study recommends that, the monetary authorities should ensure stability of the exchange rate and maintain price stability, through sterilization of capital flows as well as contain money growth within the statutory limit.

scholarly journals The Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania

2017 ◽  
Vol 17 (2) ◽  
pp. 141-158 ◽  
Author(s):  
Safet Kurtović
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Bounds Testing ◽  
The Real ◽  
Economies In Transition ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Exchange Rate Depreciation

AbstractAlmost all countries face the problems of trade balance, although they are more inherent in developing countries and economies in transition. A majority of economists adheres to a common opinion real depreciation may lead to an improvement of the trade balance. That said, countries encountering trade balance issues use real exchange rate depreciation in order to improve the trade balance situation. Albania belongs to the group of transition countries that has been facing negative trade balance over last two decades. National currency devaluations of the lek (ALL) have been used by Albania to improve its trade balance. Therefore, this paper intends to investigate the effect of the real effective exchange rate depreciation of the ALL on the trade balance of Albania using quarterly data from 1994 to 2015. Bounds testing cointegration approach, vector error correction model (VECM) and impulse response were used for empirical analysis. The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, real effective exchange rate depreciation positively affects the trade balance of Albania in both the long-run and short-run indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

scholarly journals Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
Author(s):  
Mehmet Demiral
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Adjustment Process ◽  
Industry Trade ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

<p>This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.</p><strong></strong>

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