Is the Parallel Market Premium a Reliable Indicator of Real Exchange Rate Misalignment in Developing Countries? |
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adjustment path amount of leakage analyze approach the steady arrows of motion cash-in-advance constraint CN(t comovements consumption of traded converge currency degree of misalignment denotes determine the sign developing countries domestic real interest domestic residents dominant eigenvector drawn in Figure dynamics eigenvalues equation 16 equation 31 equilibrium real exchange equilibrium value exchange rate misalignment exchange rate overvaluation exogenous extent of real favorable productivity shock foreign exchange foreign securities given by equations implies indicator of real INTERNATIONAL MONETARY FUND Kamin level of expenditure level of total locus long-run value macroeconomic magnitude of real marginal utility monotonic adjustment nondominant eigenvector official exchange rate official rate optimality condition parallel market premium policymakers positive roots positive shock premia price of consumption problem real exchange rate real interest rate solve steady-state values stock of foreign terms of traded total expenditure traded and nontraded transversality condition unofficial market utility of wealth zero