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- Title
Comparing Capital- and Trade-weighted Measures of Australia's Effective Exchange Rate.
- Authors
Makin, Tony; Robson, Alex
- Abstract
Effective exchange-rate overvaluation is considered a leading indicator of currency crises. Yet, existing measures of nominal and real effective exchange rates focus on international trade in goods and neglect the importance of international trade in assets. This article develops a range of alternative effective exchange-rate indices for the Australian dollar, based mostly on international investment stocks and flows. Capital-weighted exchange-rate measures of the Australian dollar, in nominal and real terms, reveal a stronger exchange rate over recent decades than suggested by the standard measure. Similar measures for other currencies could improve understanding of exchange-rate behaviour.
- Subjects
AUSTRALIA; FOREIGN exchange rates; DEVALUATION of currency; PRICE inflation; MONETARY policy
- Publication
Pacific Economic Review, 1999, Vol 4, Issue 2, p203
- ISSN
1361-374X
- Publication type
Article
- DOI
10.1111/1468-0106.00072