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Appendix I—Sample Characteristics
Appendix II—Variables and Sources
Appendix III—Unit Roots Test
Appendix IV—Regression Specifications
We are grateful to Miguel Savastano, Martin Cerisola, Andreas Bauer, and seminar participants at the IMF for their insightful comments and guidance, and Xiomara Jordan for invaluable administrative support. Any errors are our own.
For a survey of related methodologies to estimate equilibrium real exchange rates, see Williamson (1994) and Montiel (1999). Zalduendo (2008) shows that empirical estimations of the PPP are generally not robust to changes in sample and concludes that multivariate approaches generally have more predictive power and are more robust.
For an overview of the different methodologies used by the CGER in conducting its exchange rate assessments, see Abiad, Kannan, and Lee (2009).
Because of short time series, countries from Eastern Europe had to be excluded from the sample.
The fundamental variables used are consistent with those used in a number of other papers on determinants of current account norms, including Lee et al. (2008), Isard and Faruqee (1998); Isard et al. (2001); Isard (2007); and Obstfeld and Rogoff (1996).
See Obstfeld and Rogoff (1996).
Asian crisis countries in this study are the following: Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand.
The CGER computes 5-year averages as their preferred approach.
Projections are consistent with the published WEO data as of October 2009.
As argued before, we find no theoretical justification for oil-importing countries to experience a negative effect on their norms as a result of the oil balance. Hence, our baseline specification will be given by the coefficients estimated in column (3) in Table 1. Discussion will center on this specification, but results for other ones are available on request.
Except for several Asian crisis countries, all estimates of the current account norms using the CGER coefficients fall within the 90 percent confidence interval of our estimates.
The exercise is available upon request for all countries in the sample.