The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts. The response of a small country's real exchange rate to various shocks is derived in a...

We use a dynamic heterogeneous panel model to estimate real equilibrium exchange rates for advanced transition countries. Our method is based on out-of-sample estimations from middle-income and high-income countries, and we use a pooled mean group estimator. We find that exchange rates have...

This paper reconsiders the Balassa-Samuelson (BS) hypothesis. We analyze an OECD country panel from 1970 to 2008 and compare three data sets on sectoral productivity, including newly constructed data on total factor productivity. Overall, our within- and between-dimension estimation results do...

Exchange traded funds (ETFs) are a multi-trillion dollar market that epitomizes financialization due to its recent growth. This study examines the behavior of U.S. listed currency hedged ETF investors towards changes in the underlying benchmark and foreign exchange rate from July 2011 to...

The effect of devaluations on economies is one of the most controversial macroeconomic policies in Sub-Saharan Africa (SSA), both theoretically and empirically. This study uses panel data from 1995-2013 for 17 SSA countries and 17 non-Euro OECD economies. The main conclusion is that exchange...

This paper studies subsampling hypothesis tests for panel data that may be nonstationary, cross-sectionally correlated, and cross-sectionally cointegrated. The subsampling approach provides approximations to the finite sample distributions of the tests without estimating nuisance parameters. The...

We follow the behavioral equilibrium exchange rate approach by Clark and MacDonald (1998) to derive equilibrium real effective exchange rates and currency misalignments for the US and its 16 major trading partners. We apply cointegration and panel cointegration techniques to derive fully...

We revisit medium- to long-run exchange rate determination, focusing on the role of international investment positions. To do so, we make use of a new econometric framework accounting for conditional long-run homogeneity in heterogeneous dynamic panel data models. In particular, in our model the...

We compute the exchange rate misalignment for a set of emerging economies between 1980 and 2013 using the behavioural equilibrium exchange rate definition. The real equilibrium exchange rate is constructed using a parsimonious model and estimators that are robust to cross-sectional independence...