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Publicado en: Artículo en revista académica

Real Exchange Rates and Macroeconomic Adjustment in Sub-Saharan Countries and Other Development Countries

Raimundo Soto; Ibrahim Elbadawi.

Journal of African Economics, 6(3): 74-120, 1997.

The concept of the real exchange rate (RER) is now at the centre of the debates on economic development, growth strategies, structural adjustment and economic stabilization. However, its empirical determination, the calculation of its equilibrium path and the assessment of its misalignment are inadequate. This paper sets out to estimate the long-run cointegrated equilibrium of the RER and a set of fundamentals consistent with ‘internal’ and ‘external’ balances. An internal/external RER equilibrium model developed by S. Edwards is applied to seven developing countries, including the sub-Saharan African countries of Ghana, Kenya, Mali and Côte d’Ivoire, for the period 1960-1993. A new approach is suggested to the problem of scaling that arises in the computation of the equilibrium RER. The author presents a review of the main approaches to the concepts of RER equilibrium and sustainability of the fundamentals, and renders a formal statement of the model and the methodology involved. He deals with the estimates of the long-run cointegrated RER specifications as well as the corresponding short-run error-correction specification, and calculates indexes of equilibrium RER and RER misalignment for the selected countries. He further estimates and simulates a standard simultaneous equations model of the RER in Chile and discusses some wider policy implications.


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