"Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries,"
CEPII Working Paper 2008- 07 , April 2008 , CEPII.
Pegged exchange rates are often pointed out as more prone to risk of overvaluation, because their real exchange rates have a tendency to appreciate. We check this assumption empirically over a large sample of emerging and developing countries, by using two databases for de facto classifications by Levy-Yeyati and Sturzenegger (2003) and by Reinhart and Rogoff (2004). We assess currency misalignments by estimating real equilibrium exchange rates taking into account a Balassa effect and the impact of net foreign assets. Pegged currencies are shown to be more overvalued than floating ones.
Exchange rate regimes ; emerging and developing countries ; misalignments