cpec presentation pdf

  Introduction

  • The real exchange rate (RER) is one of the crucial concepts in open economy macroeconomics. Its role and importance is undisputed
  • The RER misalignment affects the economy both in the short and long run. Theoretically, real exchange rate can either be undervalued, overvalued, or be at equilibrium
  • The management of the RER is essential for economic growth and development (Rodrik , 2008).
  • The deviation of RER (undervaluation or overvaluation) from its equilibrium level (internal and external balance) for a relatively long time is the RER misalignments (Razin and Collins, 1997).

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