Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach
Estimating the real exchange rate misalignment from the equilibrium value and exploring the factors affecting its changes is crucial for both economic policymakers and economic agents. Among the various factors affecting exchange rate misalignment, the exchange rate regime, has received less attenti...
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| Format: | Article |
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Allameh Tabataba'i University Press
2022-12-01
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| Series: | فصلنامه پژوهشهای اقتصادی ایران |
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| Online Access: | https://ijer.atu.ac.ir/article_14451_eab56061ef5b6853d739db1da494e17b.pdf |
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| author | Seyed Hasan Malekhosseini Seyed Komail Tayebi Monireh Rafat Mahdi Yazdani |
| author_facet | Seyed Hasan Malekhosseini Seyed Komail Tayebi Monireh Rafat Mahdi Yazdani |
| author_sort | Seyed Hasan Malekhosseini |
| collection | DOAJ |
| description | Estimating the real exchange rate misalignment from the equilibrium value and exploring the factors affecting its changes is crucial for both economic policymakers and economic agents. Among the various factors affecting exchange rate misalignment, the exchange rate regime, has received less attention in experimental studies. Accordingly, the present paper seeks to find out the answer to the question of how real exchange rate misalignment is affected by different exchange rate regimes. In other words, in which of the exchange rate regimes is the exchange rate misalignment less and in which one it is higher? To answer the question, the propensity score matching approach has been used. For this purpose, we have used data from 116 developing countries with different exchange rate regimes in 2019. Other factors such as real exchange rate misalignment in the previous period, inflation, the quality of institutions and financial development have been considered as match variables to net the effect of the exchange rate regime on real exchange rate misalignment and to separate the effects of other variables. The results showed that the real exchange rate misalignment from its equilibrium level has responded significantly to the type of exchange rate regime adopted by the countries, so that the floating exchange rate regime increases the real exchange rate misalignment in the selected developing countries wherever implemented. It can be argued that factors such as high exchange rate fluctuations, a more drastic adjustment in the price level, and speculative bubbles or contagion effects in the floating exchange rate regime have led to an increase in these misalignments. |
| first_indexed | 2024-03-08T17:45:26Z |
| format | Article |
| id | doaj.art-eafe41abc4ef400ab0bb80159c7fb1f0 |
| institution | Directory Open Access Journal |
| issn | 1726-0728 2476-6445 |
| language | fas |
| last_indexed | 2024-03-08T17:45:26Z |
| publishDate | 2022-12-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | فصلنامه پژوهشهای اقتصادی ایران |
| spelling | doaj.art-eafe41abc4ef400ab0bb80159c7fb1f02024-01-02T10:30:37ZfasAllameh Tabataba'i University Pressفصلنامه پژوهشهای اقتصادی ایران1726-07282476-64452022-12-01279310513610.22054/ijer.2022.62893.102614451Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching ApproachSeyed Hasan Malekhosseini0Seyed Komail Tayebi1Monireh Rafat2Mahdi Yazdani3PhD of Economics, Department of Economics, University of Isfahan, Isfahan, IranProfessor, Department of Economics, University of Isfahan, Isfahan, IranAssociate Professor, Department of Economics, University of Isfahan, Isfahan, IranAssistant Professor, Department of Economics, Shahid Beheshti University, Tehran, IranEstimating the real exchange rate misalignment from the equilibrium value and exploring the factors affecting its changes is crucial for both economic policymakers and economic agents. Among the various factors affecting exchange rate misalignment, the exchange rate regime, has received less attention in experimental studies. Accordingly, the present paper seeks to find out the answer to the question of how real exchange rate misalignment is affected by different exchange rate regimes. In other words, in which of the exchange rate regimes is the exchange rate misalignment less and in which one it is higher? To answer the question, the propensity score matching approach has been used. For this purpose, we have used data from 116 developing countries with different exchange rate regimes in 2019. Other factors such as real exchange rate misalignment in the previous period, inflation, the quality of institutions and financial development have been considered as match variables to net the effect of the exchange rate regime on real exchange rate misalignment and to separate the effects of other variables. The results showed that the real exchange rate misalignment from its equilibrium level has responded significantly to the type of exchange rate regime adopted by the countries, so that the floating exchange rate regime increases the real exchange rate misalignment in the selected developing countries wherever implemented. It can be argued that factors such as high exchange rate fluctuations, a more drastic adjustment in the price level, and speculative bubbles or contagion effects in the floating exchange rate regime have led to an increase in these misalignments.https://ijer.atu.ac.ir/article_14451_eab56061ef5b6853d739db1da494e17b.pdfexchange rate regimeexchange rate misalignmentdeveloping countriespropensity score matchin |
| spellingShingle | Seyed Hasan Malekhosseini Seyed Komail Tayebi Monireh Rafat Mahdi Yazdani Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach فصلنامه پژوهشهای اقتصادی ایران exchange rate regime exchange rate misalignment developing countries propensity score matchin |
| title | Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach |
| title_full | Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach |
| title_fullStr | Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach |
| title_full_unstemmed | Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach |
| title_short | Evaluation of Exchange Rate Regime’s Effect on Real Exchange Rate Misalignment: An Application of Propensity Score Matching Approach |
| title_sort | evaluation of exchange rate regime s effect on real exchange rate misalignment an application of propensity score matching approach |
| topic | exchange rate regime exchange rate misalignment developing countries propensity score matchin |
| url | https://ijer.atu.ac.ir/article_14451_eab56061ef5b6853d739db1da494e17b.pdf |
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