Real Exchange Rate Misalignment and Business Cycle Fluctuations in Asia and the Pacific

Publication | March 2022
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This paper investigates the impact of real exchange rate (RER) misalignment on business cycles among 22 economies in Asia and the Pacific from 1990 to 2018.

The study uses a panel vector autoregression involving consumer price index (CPI) inflation, output gap, short-term interest rate, and RER misalignment. It finds that RER overvaluation may lead to a reduction in CPI inflation and short-term interest rate. It also illustrates Asia and the Pacific’s diversity as evidenced by the output gaps of some economies, particularly in Southeast Asia, which are shown to be more susceptible to RER misalignment shocks.

Contents

  • Introduction
  • Background
  • Data
  • Methodology
  • Results
  • Economy-Specific Bayesian Vector Autoregression
  • Conclusion

Additional Details

Authors
Type
Series
Subjects
  • Economics
  • Industry and trade
Pages
  • 38
Dimensions
  • 8.5 x 11
SKU
  • WPS220066-2
ISSN
  • 2313-6537 (print)
  • 2313-6545 (electronic)

Published Version

Ambaw, Dessie, Madhavi Pundit, Arief Ramayandi, and Nicholas Sim. 2023. "Real Exchange Rate Misalignment and Business Cycle Fluctuations in the Asia-Pacific." Asian Economic Journal 37 (2): 164–89. https://doi.org/10.1111/asej.12301.

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