This paper extends the model of Engler et al. (2007) on the adjustment of the US current account to a three-country world economy. This allows an analysis of the differential impact of a reversal of the US current account on Europe and Asia. In particular, the outcomes under different exchange...

The Turkish current account has been exploding in the last few years leading to concerns of a crisis. One of the primary factors identified in the rising deficits is the appreciating lira. In addition, income elasticity of exports and imports can also shed light on continuing trade deficits. In...

This paper investigates the factors affecting the demand for the Association of Southeast Asian Nations' (ASEAN) labor-intensive exports. Results obtained using a panel data set including exports to 25 countries indicate that an appreciation in ASEAN countries would substantially reduce exports...

This paper studies how removing barriers to competition in the nontraded goods sector affects the current account, the real exchange rate, and factor prices in a small open economy. We show that the expansion of the nontraded sector that results from a "deregulation shock" is associated with an...

This paper presents a two-country two-commodity dynamic model with free international asset trade in which one country achieves full employment and the other suffers long-run unemployment. Own and spill-over effects of changes in policy, technological and preference parameters that emerge...

This paper reviews three different concepts of equilibrium exchange rates that are widely used in policy analysis and constitute the backbone of the IMF CGER assessment: the Macroeconomic Balance, the External Sustainability and the reduced form approaches. We raise a number of econometric...

This paper develops a flexible price, two-sector nominal growth model, in order to study the nominal aspects of capital accumulation (convergence). We adopt a classical model of a small open economy with traded and nontraded goods, and enrich its structure with gradual investment and a...

The paper examines misalignment of the Turkish lira between 1998 to 2008. Misalignment, specifically overvaluation has been linked to fixed exchange rate regimes. By studying the case of Turkey during this period which covers both a fixed and floating exchange rate regime, we contribute to the...

Exchange rate fluctuations influence economic activity not only via the standard trade channel, but also through a financial channel, which operates through the impact of exchange rate fluctuations on borrowers' balance sheets and lenders' risk-taking capacity. This paper explores the...

Assessing real effective exchange rate equilibrium is a challenging task. There is no consensus in the literature on which methodologies and norms apply best to tackle real effective exchange rate misalignment estimation. The novelty of our paper consists of showing that different methodologies...