Methodology for Current Account and Exchange Rate Assessments

By G. Russell Kincaid, Martin Fetherston, Peter Isard, Hamid Faruqee

December 28, 2001

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G. Russell Kincaid, Martin Fetherston, Peter Isard, and Hamid Faruqee. Methodology for Current Account and Exchange Rate Assessments, (USA: International Monetary Fund, 2001) accessed November 21, 2024

Summary

This chapter reports on Coordinating Group on Exchange Rate Issues’ (CGER) works and provides perspectives on alternative frameworks for assessing exchange rates and the rationale for CGER's general approach. The primary motivation for the work of the CGER is to identify cases where exchange rates appear to be substantially out of line with medium-run macroeconomic fundamentals. It is recognized that such situations can have different interpretations, depending on the cyclical positions of economies and other circumstances. The assessments of exchange rates among industrial country currencies rely primarily on an application of a macroeconomic balance framework. This framework focuses on the extent to which the current account positions associated with prevailing exchange rates are consistent with medium-run fundamentals. Substantial discrepancies between exchange rates and their medium-run equilibrium levels, when they emerge, raise two different, however, related issues for the IMF to address in its exercise of bilateral and multilateral Surveillance.

Subject: Balance of payments, Current account, Emerging and frontier financial markets, Exchange rate adjustments, Exchange rates, Financial markets, Foreign exchange, Real exchange rates

Keywords: Area department, CGER, Current account, Current account position, Emerging and frontier financial markets, Exchange rate, Exchange rate adjustments, Exchange rate position, Exchange rates, Global, IMF's executive board, Investment, OP, Real exchange rates, Saving-investment balance

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Occasional Paper No. 2001/006
Stock No:

S209EA0000000
ISBN:

9781589060814
ISSN:

0251-6365

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