This paper attempts to extend the range of countries covered by the IMF’s multilateral real exchange rate indices based on relative unit labor costs (REER-ULCs) in manufacturing. A data set was assembled that permits calculation of REER-ULCs for 23 newly industrialized, developing, and transition economies in addition to the 21 industrial countries covered by the current system. Although the results are mostly quite encouraging, they should be considered preliminary because of uncertainty about the reliability and comparability of the underlying data. Also, unit labor costs are not available on as timely a basis as consumer price indices (CPIs), especially for nonindustrial economies. Thus, the ULC-based indicators should supplement rather than replace the current CPI-based system. [JEL: F31, G15, N20, N60, O57]
This paper was written while Stephen Golub was a visiting scholar in the IMF Research Department. The authors thank Dominique Desruelle. Graham Macche, and Flemming Larsen of the IMF, and Patricia Capdevielle and Christopher Kask of the U.S. Bureau of Labor Statistics for helpful discussions and comments, and Teng-Siew Boxall of the IMF for providing the trade weights used in the calculations.