Author: Valérie Mignon / Topic: Exchange Rate Policy

Author:: Cécile Couharde, Carl Grekou, and Valérie Mignon
Publication Date:: 10-2020
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper describes the new CEPII-MULTIPRIL database on Multilateral Price Levels (MPL) introduced in 2020. The MULTIPRIL database covers a wide sample of 178 countries over the 1990-2018 period, and includes relative price level series computed vis-à-vis two sets of trading partners (177 and the top 30) according to three different trade-weighting schemes. It also contains MPL-based currency misalignments series for 156 countries over the 1991-2018 period. MULTIPRIL offers the potential to improve the coverage and quality of worldwide price-competitiveness comparisons. By focusing on price level data, it usefully complements the EQCHANGE database on equilibrium exchange rates and currency misalignments derived from series in indices. Its multilateral setting provides a more comprehensive picture of relative price levels and currency misalignments compared to existing bilateral measures.
Topic:: Economics, International Political Economy, Exchange Rate Policy, Trade, Database, and Price
Political Geography:: Global Focus

Author:: Jorge Carrera, Blaise Gnimassoun, Valérie Mignon, and Romain Restout
Publication Date:: 04-2020
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper conducts an in-depth empirical investigation on the impact of the exchange rate regime (ERR) on real currency misalignments in a panel of 17 Latin American countries over the 1970-2016 period. We consider explicitly the two dimensions of misalignments, size and persistence, and evaluate four different ERR classifications. We also pay attention to cross-sectional dependencies across countries that appear to be important in Latin America, and provide several robustness checks. Our main findings show that, although fixed ERR perform well in limiting the size of misalignments – and in reducing inflation and fiscal deficit – the disequilibria are more persistent. On the contrary, allowing for more flexibility reduces persistence but increases the size of misalignments. Overall, we show that Latin American countries face a crucial trade-off when they have to choose their ERR.
Topic:: Economics, International Political Economy, Exchange Rate Policy, and Currency
Political Geography:: Latin America

Author:: Valérie Mignon and Antonia Lopez-Villavicencio
Publication Date:: 06-2019
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper assesses whether the emergence of new trading partners (i.e., China and Eastern Europe) as suppliers reduces the exchange rate pass-through (ERPT) in Eurozone countries which differ regarding their external exposure. Using bilateral data on import prices at the two-digit sector level, we find that (i) pass-through is complete in many cases, (ii) ERPT from China is higher than from the United States, and (iii) there is no compelling evidence of a generalized link between ERPT and the increasing integration of some emerging markets in European imports. We also show that the launch of the single currency has not provoked a sufficient change in the part of trade exposed to exchange rate fluctuations and, therefore, has not affected the pass-through. Overall, the trend of liberalization in new players' markets has not altered the competitive environment such as to induce exporters of other countries to absorb exchange rate depreciations.
Topic:: Economics, International Political Economy, International Trade and Finance, Exchange Rate Policy, Eurozone, Trade, and Imports
Political Geography:: China, Europe, and Eastern Europe

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