Title

Globalization, exports, and effective exchange rate indices

Document Type

Journal article

Source Publication

Journal of International Money and Finance

Publication Date

12-1-2012

Volume

31

Issue

5

First Page

996

Last Page

1007

Keywords

Effective exchange rate indices, Real effective exchange rate indices, GDP-weighted effective exchange rates, Globalization, Estimated exports functions

Abstract

This paper offers a new way of compiling effective exchange rate indices, which is then shown to perform generally better in prototype equations explaining total real exports than other published indices. Researchers can use this method to compile effective exchange rates, real or nominal, readily for any country. The generally superior performance, based on cointegration tests using data from four major economies, four Latin American countries, and four South East Asian countries, suggests the proposed index which uses GDP weights rather than trade weights, is more appropriate in a highly globalized world. Intensified globalization in the past two decades appears indicated by the higher elasticities of exports with respect to the real effective exchange rate over time.

DOI

10.1016/j.jimonfin.2011.12.007

Print ISSN

02615606

E-ISSN

18730639

Publisher Statement

Copyright © 2011 Elsevier Ltd.

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Full-text Version

Publisher’s Version

Recommended Citation

Ho, L. S. (2012). Globalization, exports, and effective exchange rate indices. Journal of International Money and Finance, 31(5), 996-1007. doi: 10.1016/j.jimonfin.2011.12.007