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Trends in real exchange rate behavior in selected developing countries (English)

This paper analyzes several aspects of real exchange rate behavior in developing countries. First, it provides a clarifying and comprehensive review of the different definitions of "the" real exchange rate that have appeared in the literature. Second, it discusses in detail alternative measures of real exchange rates and compares the behavior of these different indexes. Third, it provides actual quarterly series of trade weighted effective real exchange rates for 1965-84 for 34 developing countries. Fourth, it presents the more salient stylized facts of real exchange rate behavior for the 34 countries. The main empirical findings of the paper can be summarized as follows: (1) No significant trend over long term periods is observed in the real exchange rate in the majority of these countries. Over the shorter recent period 78-84, however, a tendency towards real appreciation is observed. (2) In most countries the real exchange rate exhibited a significant degree of volatility. (3) Real exchange rate variability differed dramatically across countries. (4) The purchasing power parity view of real exchange rates does not hold for any of these countries.




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Edwards, Sebastian Ng, Francis

Trends in real exchange rate behavior in selected developing countries (English). Country Policy Department discussion paper,no. CPD 8516 Washington, D.C. : World Bank Group.