رژیم نرخ ارز، عدم تنظیم واقعی و بحران ارز

Based on 69 sample countries, this paper examines the effect of macroeconomic fundamentals on real effective exchange rates (REER) in these sample countries. Using the misalignment of actual REER from its equilibrium level, we have estimated the factors explaining the extent of currency over- or under-valuation. Overall, we find that the higher the flexibility of the currency regime, the lower is the misalignment. The estimates are robust to different sub-samples of countries. We then explore the impact of such misalignment on the probability of a currency crisis in the next period, indicating the extent to which misalignment could be used as a leading indicator of a potential crisis. This paper thus makes a new contribution to the debate on the choice of exchange rate regime by bringing together real exchange rate misalignment and currency crisis literature.

The choice of a currency regime is an important political decision, and policy makers tend to be more interested in the behaviour of real exchange rates when measuring a currency's overall alignment. Thus estimation of the equilibrium real exchange rate and its misalignment from the actual can signal crucial information if a currency is misvalued, which is of potential interest to policy makers, central banks, and financial institutions. In particular, misalignment may be an indicator for future re-alignments from which currency crises can emerge. In this paper, we estimate real exchange rate misalignment in a sample of 69 countries; we analyse the effect of the official (de jure) currency regime choice2 on the degree of real exchange rate misalignment, and we test whether real exchange rate misalignment is correlated with future currency crises. The real effective exchange rate (REER) as a competitiveness indicator has important ramifications for currency misalignments. However, the REER does not speak to the question of over- or undervaluation. Valuation can only be determined relative to an equilibrium norm (see Devarajan, 1999). Overvaluations occur, when actual exchange rates exceed the estimated equilibrium value and under-valuations imply that the actual exchange rate falls short of the estimated equilibrium value prevailing at that point in time. Different approaches to calculate equilibrium exchange rates have been adopted in the literature. The IMF distinguishes between macroeconomic balance approach (see Driver and Westaway, 2004 and Williamson, 1994), reduced-form equilibrium real exchange rate approach (see Barisone et al., 2006 and Hughes-Hallett and Richter, 2004) and external stability approach (Lee et al., 2008).3 While the first and the third of these approaches rely on explicit definitions of macroeconomic balance or external sustainability, respectively, the second approach assumes that real exchange rates have been determined by fundamental factors in the past and tries to discover the corresponding relationship econometrically. We follow this reduced form equilibrium exchange rate approach here. Within such a reduced-form fundamental equilibrium exchange rate (FEER) framework, we use a panel dataset from a sample of 69 countries over the time period 1970–2006, and test whether real exchange rates are cointegrated with key economic variables. The results support a cointegrating relationship between the REER and variables that reflect different economic shocks originating from structural (GDP — domestic and foreign), policy (trade openness) and external (terms of trade) sources. We then calculate the misalignment as the difference between the fitted value and the actual observation. Misalignments occur in markets where actual exchange rates do not respond adequately to changes in economic fundamentals. The awareness of its existence then signals the need for policy changes to bring about the necessary correction. There are different exchange rate arrangements, ranging from ‘hard pegs’ and currency board to a pegged rate within a band (‘soft peg’), a crawling peg, a crawling band, managed floating with no pre-announced exchange rate path and free floating. As Frankel (1999) states, no single currency system is optimal for all countries for all times. Melvin (1985) found that both domestic and foreign shocks influence a country's choice of exchange rate regime. Using data on different de jure exchange rate regimes, we show that the choice of exchange rate regime helps to explain the variation in misalignment across countries. We find that misalignment is less volatile in case of relatively flexible regimes.4 This result is in line with Hoffmann (2007) who finds that floating exchange rate regimes are a better choice for developing countries, because countries can utilise the exchange rate under floating regimes to smooth the adjustment process and stabilise macroeconomic variables when negative external shocks hit the economy. More flexible exchange rate regimes may also neutralise the impact of any terms of trade shocks on the current account (see Broda, 2004). Exchange rate misalignments contribute to external economic imbalances which play an important role in the ongoing political debate on global imbalances (International Monetary Fund, 2012). Strong and persistent misalignments indicate economic imbalances from which macroeconomic crises can emerge. In particular, disruptive exchange rate adjustments can take place when misalignments exceed certain threshold values. Therefore, misalignment may help to predict currency crises. Including estimated misalignment in a forecasting equation for currency crises, this paper brings together the exchange rate misalignment literature with the currency crisis literature. The paper is organised as follows. Section 2 provides a stylised open economy model, which helps us selecting variables for the long-run equilibrium real exchange rate reduced form equation. Section 3 presents the data and the empirical analysis of real exchange rates and misalignment. In Section 4, we discuss the relationship between misalignment and currency crises. Finally, Section 5 concludes the paper.

Real exchange rate fluctuations have important consequences for competitiveness, fiscal sustainability and monetary policy. We identify macroeconomic fundamentals that exhibit a significant long-run relationship to REER, and we interpret deviations from the long-run equilibrium as misalignment. In many emerging market economies in the 1990s, REER series reflected large exchange rate overvaluations in the run-up to many financial crises. Based on 69 sample countries, using the misalignment of actual REER from its equilibrium level, we have estimated the role of exchange rate regimes in explaining the extent of currency over- or undervaluation. We find that the higher the flexibility of the regime, the lower is the misalignment and thus the lower is the likelihood of an impending crisis. Higher misalignment in the lead up to the currency crisis in most of the crisis-hit countries suggests that monitoring currency valuation relative to an equilibrium value is important and therefore measuring the extent of REER misalignment can contribute to prevent currency crises by indicating to policy makers the need for a change of policy. This paper suggests that a more flexible exchange rate policy is inevitable to minimise the degree of misalignment, although it has the disadvantage of raising nominal exchange rate volatility.