- G. Kincaid, Martin Fetherston, Peter Isard, and Hamid Faruqee
- Published Date:
- December 2001
© 2001 International Monetary Fund
Production: IMF Graphics Section
Figures: Sanaa Elaroussi
Typesetting: Alicia Etchebarne-Bourdin
Methodology for current account and exchange rate assessments/Peter Isard …
[et al.]—Washington, D.C.: International Monetary Fund, 2001.
p. cm.—(Occasional paper, 0251-6365); 209
Includes bibliographical references
1. Foreign exchange rates. 2. Balance of payments. 3. International Monetary
Fund. I. Isard, Peter. II. International Monetary Fund. III. Occasional paper
(International Monetary Fund); no. 209
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The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
–between years or months (e.g., 2000–01 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 2000/01) to indicate a fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
In carrying out its bilateral and multilateral surveillance responsibilities, the IMF needs to make judgments about the consistency between prevailing exchange rates and medium-run fundamentals. This paper discusses the methodologies used by the IMF staff, pointing to conceptual and empirical limitations and to various issues that arise in interpreting the assessments. These methodologies will continue to evolve over time in response to efforts to strengthen the existing framework.
Among the IMF staff, much of the responsibility for shaping consensus on methodology and conducting exchange rate assessments has been assigned to the interdepartmental Coordinating Group on Exchange Rate Issues (CGER). CGER was established in 1995 under the cochairmanship of representatives from the Policy Development and Review Department and the Research Department, and with active participation of the IMF’s area departments. The authors of this paper have each played a major role in CGER’s work. Russell Kincaid held the Policy Development and Review Department cochair position from fall 1998 to spring 2001, Martin Fetherston is currently the Policy Development and Review Department cochair, Peter Isard has been cochair for the Research Department, and Hamid Faruqee has made central contributions to the methodological framework while also facilitating the assessment exercises in numerous ways. The general direction of CGER’s analytical work has been guided mainly by Stanley Fischer, the First Deputy Managing Director of the IMF (through August 2001), Michael Mussa, the Economic Counsellor and Director of the Research Department (through July 2001), and Jack Boorman, Counsellor and Director of the Policy Development and Review Department (through November 2001).
The paper has benefited from discussion at an IMF Executive Board seminar in June 2001. The authors are also grateful for numerous comments and suggestions received from Thomas Krueger and other colleagues on the IMF staff, to Susanna Mursula and Sarma Jayanthi for research assistance, and to Victoria Ashiru and Dawn Heaney for preparing the manuscript. Esha Ray of the External Relations Department edited the manuscript and coordinated production of the publication.
The opinions expressed in the paper are those of the authors and do not necessarily reflect the views of the IMF or its Executive Directors.