A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation
Abstract
The author discusses alternative measures of
effective exchange rates in the context
of their theoretical underpinnings and actual construction.
Focusing on contemporary indices and
recently developed econometric methods, he examines the empirical
characteristics of these differing series, including the exchange rates for the United States, the
euro area and several East Asian countries. Case studies illustrate the issues that confront the applied economist or
policymaker in using the measures of real effective exchange rates available.