This paper establishes a simple theory-based real exchange rate (RER) Misalignment Index for countries around the world from 1950-2014, and shows that South Africa's RER has been undervalued over the last decade. For the most recent year of 2014, depending on the proxy for productivity, it is...

This paper studies the role of the exchange rate regime for trade of new products. It first provides VAR evidence that a rise in external productivity shifts trade away from new products and more so in fixed regimes. Then, it presents a model with firm dynamics in line with this evidence. We...

Voluminous theoretical and empirical research shows that real exchange rate (RER) undervaluation could be conducive to economic development. Why do countries then often avoid the pursuit of policies that facilitate undervaluation or even intentionally pursue RER overvaluation? We address this...

Many economists believe that the nature of exchange rate management was an important reason for rapid economic growth in East Asia. In this view, Asian countries avoided extreme exchange rate appreciations and kept their nominal exchange rates close to market clearing levels. In contrast, the...