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
Publisher
Pergamon Press
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.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
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