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The Level REER model in the External Balance Assessment (EBA) Methodology
Author:
Rui Mano
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Ms. Carolina Osorio Buitron
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Mr. Luca A Ricci
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Mr. Mauricio Vargas null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 192
Language:
English
Publication Date:
13 Sep 2019
DOI:
https://doi.org/10.5089/9781513511023.001
ISBN:
9781513511023
ISSN:
1018-5941
Pages:
40
Keywords:
WP; IMF working papers; working paper; research; author; comment; TRD PRT; GDP deflator; express in IMF; elicit comment; level REER; Real effective exchange rates; Exchange rates; Real interest rates; Capital account; Exchange rate arrangements; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper offers an empirical model of the drivers of the level of the Real Effective Exchange Rate (REER) that is now part of the IMF’s methodology for the assessment of external positions, including exchange rates. It constructs a measure of the level of the REER and it offers a panel regression that considers a large number of cross-sectional and time varying factors, guided by the extensive literature. Its main contribution is to enhance our understanding of the cross-sectional determinants of the level of the REER, while taking into account the time-series drivers. The framework accounts for the much larger cross-sectional variation of the level REER, and can better explain the time series variation of level REER when these are based on GDP-deflators rather than on consumer price indices. The latter suggest there may be merits to broadening the assessments to include such measures, although further analysis is required.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund