This paper focuses on assessments of real exchange rates using PPP data and examines their limitations when these are based exclusively on bivariate estimations. It begins by presenting an analytical framework of the real exchange rate that shows that these estimations make many restrictive...

The significant real exchange rate appreciation in Armenia and Georgia since 2003, coupled with persistent current account deficits, raises the question of whether real exchange rates have become overvalued. This paper seeks to identify possible exchange rate misalignment by applying the...

We reassess exchange rate prediction using a wider set of models that have been proposed in the last decade. The performance of these models is compared against two reference specifications-purchasing power parity and the sticky-price monetary model. The models are estimated in first-difference...

There is good reason and much evidence to suggest that the real exchange rate matters for economic growth, but why? The "Washington Consensus" (WC) view holds that real exchange rate misalignment implies macroeconomic imbalances that are themselves bad for growth. In contrast, Rodrik (2008)...

A puzzle in international macroeconomics is that observed real exchange rates are highly volatile. Standard international real business cycle (IRBC) models cannot reproduce this fact. We show that TFP processes for the U.S. and the ""rest of the world,"" is characterized by a vector error...

Intro -- Contents -- I. INTRODUCTION -- II. DATA AND METHODOLOGY -- III. MODELING AND INTERPRETING THE EQUILIBRIUM REAL EXCHANGE RATE -- IV. ASSESSING THE EQUILIBRIUM REAL EXCHANGE RATE -- V. CONCLUSIONS -- Appendix: Methodological Problems with Smoothing -- REFERENCES.