Exchange rate misalignment estimates : Sources of differences

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Title: Exchange rate misalignment estimates : Sources of differences
Author: Cheung, Yin-Wong ; Fujii, Eiji
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 25/2011
Year of publication: 2011
Publication date: 28.9.2011
Published in: Published in International Journal of Finance and Economics, Volume 19, Issue 2, March 2014, Pages 91-121.
Pages: 56 s.
Keywords: valuuttakurssit; ostovoimapariteetti; hinnat; Kiina; USA; Brasilia; Intia; Venäjä; Bofit-kokoelma; BRIC
Abstract: We study the differences in currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a country s participation status in the ICP survey and its data quality a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The patterns of changes in estimated degrees of misalignment across individual countries, as exemplified by the BRIC economies, are highly variable.

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