Cover -- Contents -- Foreword -- Acknowledgments -- Introduction -- I: Determination and Impact of the Real Exchange Rate -- 1. Commodity Currencies and the Real Exchange Rate -- Theoretical Framework -- Data -- Empirical Analysis of Comovement -- Conclusions -- Appendix 1.1 Details of the Theoretical Framework -- Appendix 1.2 Description of the Data -- Appendix 1.3 Construction of the Country-Specific Nominal Price Indices of Commodity Exports -- Appendix 1.4 Cointegration Tests: Real Exchange Rate and Real Commodity Prices, Commodity-Exporting Countries, 1980-2002 -- References -- 2. Exchange Rates and Trade Balance Adjustment in Emerging Market Economies -- The Analytics of Trade Balance Adjustment -- Country Classification and Estimation Strategy -- Empirical Results -- Conclusions -- Appendix 2.1 Overview of the Empirical Literature on Trade Volume Price Elasticities and Pricing to Market -- Appendix 2.2 Marshall-Lerner Redux -- Appendix 2.3 Data Description and Sample -- Appendix 2.4 Robustness Tests -- Appendix 2.5 Estimation Procedures -- References -- 3. Aid Volatility and Macroeconomic Policies -- Empirical Evidence -- Conclusions -- References -- 4. Exchange Rate Pass-Through in the Euro Area -- Empirical Estimates -- Model of Incomplete Pass-Through -- Matching Theory and Empirics -- Conclusions -- Appendix 4.1 Stationarity, Causality, and Sensitivity Analysis -- References -- II: Assessing Competitiveness and the Equilibrium Real Exchange Rate in Specific Countries or Country Groups -- 5. Estimation of the Equilibrium Real Exchange Rate for South Africa -- Brief Review of the Literature -- Data and Methodology -- Econometric Results and Their Robustness -- Equilibrium Real Exchange Rate -- Conclusions -- Appendix 5.1 Variables: Definitions and Sources -- References.

6. France, Germany, Italy, and Spain: Explaining Differences in External Sector Performance Among Large Euro Area Countries -- Developments in Key Determinants of Trade -- Econometric Analysis -- Concluding Remarks and Implications -- Appendix 6.1 Data Sources -- Appendix 6.2 Error Correction Model for Trade Equations and Cointegration Tests -- Appendix 6.3 Principle of Dynamic Contributions -- References -- 7. Maintaining Competitiveness in the Global Economy -- Export Performance -- Exchange Rate and Competitiveness -- Developments in the Real Effective Exchange Rate -- Determinants of the Real Effective Exchange Rate -- Outlook for India's Export Competitiveness -- Conclusions -- References -- 8. Modeling the Real Exchange Rates in WAEMU and CEMAC -- Theory and Empirical Formulation -- Empirical Methodology -- Cointegration Analysis -- Estimation of Equilibrium -- Concluding Remarks -- Appendix 8.1 Variable Definitions and Sources -- Appendix 8.2 Data, Test Diagnostics, and Results -- References -- III: Considerations in Choice of Exchange Rate Regime -- 9. To Peg or Not to Peg: A Template for Assessing the Nobler -- De Facto Regimes in Kazakhstan and Pakistan -- Template -- Scorecard -- Conclusions -- References -- 10. Exits from Heavily Managed Exchange Rate Regimes: How Good Has the Going Been? -- The Frequency and Features of Orderly and Disorderly Exits -- Determinants of Exits -- Results -- A Review of the Literature -- Conclusions -- Appendix 10.1 Explanatory Variables in the Study -- References -- 11. Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis -- A Word on Theories of Exchange Rate Regime Choice -- Review of Previous Empirical Findings -- Exchange Rate Regime Classifications, Data, and Estimation Strategy -- Results -- Concluding Remarks -- References -- List of Abbreviations -- Contributors -- Figures.

1.1 Real Exchange Rate and Real Commodity Price, Selected Commodity-Exporting Countries, 1980-2002 -- 2.1 Price Deflators, 1980-2005 -- 2.2 Profiles for Exports, Imports, and Trade Balances -- 2.3 Effect of a Depreciation on the Trade Balance -- 4.1 Effects of Exchange Rate Shock on Euro Area Prices -- 4.2 Pricing Behavior of Domestic and Foreign Firms -- 4.3 Empirical and Theoretical Impulse Response Paths for the Euro Area -- 5.1 Real Effective Exchange Rate, 1970:Q1-2002:Q1 -- 5.2 Determinants of Real Effective Exchange Rate, 1970-2002 -- 5.3 Real Effective Exchange Rate -- 6.1 Export Unit Values -- 6.2 Real Effective Exchange Rates, Productivity, and Wages -- 6.3 Growth Rate of World Demand -- 6.4 Growth Rate of Domestic Demand -- 6.5 Accounting for Country Differences in Trade Growth -- 6.6 France: Dynamic Contributions of Various Factors to Exports and Imports, 1999-2004 -- 6.7. Germany: Dynamic Contributions of Various Factors to Exports and Imports, 1999-2004 -- 6.8. Italy: Dynamic Contributions of Various Factors to Exports and Import, 1999-2004 -- 6.9 Spain: Dynamic Contributions of Various Factors to Exports and Imports, 1999-2004 -- 7.1 World Market Position of Indian Exports, 1990-2003 -- 7.2 India's Export Performance Relative to Other Asian Countries -- 7.3 IMD Competitiveness Indicators, 2005 -- 7.4 CPI-Based Real Effective Exchange Rate and Its Components -- 7.5 RBI Five-Country REER and IMF Revised REER Measure -- 7.6 Specification 1: Actual and Estimated CPI-Based REER -- 7.7 Specification 2: Estimates of the Equilibrium REER -- 7.8 Effective Exchange Rate Flexibility -- 8.1 Actual and Hodrick-Prescott Equilibrium Real Effective Exchange Rates -- 8.2 Actual and Gonzalo-Granger Equilibrium Real Effective Exchange Rates -- 8.3 Estimated Misalignment Episodes -- 8.A.1 Cointegration Variables -- 8.A.2 Exchange Rates and Relative Prices.

8.A.3 Real Effective Exchange Rates of Member Countries -- 8.A.4 Model Stability Tests -- 8.A.5 Impulse Response Functions -- 9.1 Degree of Flexibility of Rupee and Tenge -- 9.2 Trade Orientation -- 9.3 Financial Integration -- 9.4 Diversification -- 9.5 Stabilization -- 9.6 Credibility -- 9.7 Fear-of-Floating Effects -- 10.1 Exits by Duration -- Tables -- 1.1 Principal Commodity Exports and Percentage Share of Primary Commodities in Total Exports, 1991-99 -- 1.2 Cointegration and Stability Tests, Real Exchange Rate and Real Commodity Prices, 1980-2002 -- 1.3 Real Exchange Rate and Real Commodity Prices: Exogeneity and Causality, 1980-2002 -- 2.1 Export Volumes: Coefficient Estimates and Implied Elasticities -- 2.2 Pricing Equation for Manufacturing Exporters: Coefficient Estimates and Implied Elasticities -- 2.3 Inflation Rate: Coefficient Estimates and Implied Elasticities -- 2.4 Volume of Imports and Absorption: Coefficient Estimates and Implied Elasticities -- 2.5 Effects of Devaluations on Export-Import Values and on the Trade Balance for Different Classes of Exporters -- 2.A.1 Estimates of Price Elasticities in Selected Papers -- 2.A.2 Country Sample -- 2.A.3 Export Volumes (Long-Run Elasticities) in Different Samples -- 2.A.4 Inflation Equation: Effect of a Change in Exchange Rates -- 2.A.5 Impact on the Trade Balance of a 10 Percent Depreciation -- 2.A.6 Pricing Equation for Manufacturing Exporters for Different Samples -- 2.A.7 Pricing Equation for Imports -- 2.A.8 Trade Elasticities and Estimation Methodologies -- 2.A.9 Long-Run Effects of Devaluations on Export-Import Values and on the Trade Balance (in Foreign Currency) for Different Classes of Exporters -- 3.1 The Sample -- 3.2 Summary Statistics -- 3.3 Bivariate Correlations Among Main Variables -- 3.4 Foreign Aid and Trade Balance Volatility -- 4.1 Euro Area Pass-Through Elasticities.

4.2 Pass-Through Elasticities in Trade Prices: International Comparisons -- 4.3 Implicit Esimates of Local "Distribution" Costs -- 4.4 Summary of Behavioral Parameter Estimates -- 4.A.1 Unit Root and Stationarity Tests -- 4.A.2 Cointegration Tests -- 4.A.3 Bivariate Granger Causality Tests -- 4.A.4 Block Exogeneity Tests -- 4.A.5 Euro Area Pass-Through Elasticities Across VAR Reorderings -- 5.1 Selected Results of the VECM Specification -- 5.2 Johansen Test for Stationarity and Exclusion Test -- 5.3 Vector Error Correction Tests -- 5.A.1 Main Commodities Exported and Relative Weights -- 6.1 Contributions of Net Exports to GDP Growth -- 6.2 Balance on Non-oil Goods and Services -- 6.3 Geographic Orientation of Exports, 2004 -- 6.4 Cumulative Growth and Contribution of Trade Determinants, 2001-04 -- 6.A.1 Testing for Cointegration Relationship and Estimation of the Long-Term Trade Equations -- 7.1 Indicators of Export Growth -- 7.2 Composition of Goods Exports -- 7.3 Estimates of Deviation from the Equilibrium Real Effective Exchange Rate -- 7.4 Revised RBI and IMF Country Weights in REER Indices -- 7.5 Real Effective Exchange Rate Determinants -- 8.1 Results of Cointegration Estimation -- 8.A.1 Real Effective Exchange Rate and Its Components -- 8.A.2 Unit Root Tests for Variables in Levels and Differences -- 8.A.3 Tests for Model Reduction -- 8.A.4 Diagnostic Tests for the Residuals -- 8.A.5 Johansen Cointegration Tests -- 9.1 Countries in Sample -- 9.2 Scorecard -- 10.1 Reinhart-Rogoff Natural Exchange Rate Classification -- 10.2 Exits to More Flexible Exchange Rate Regimes, 1980-2002 -- 10.3 Summary Statistics of Explanatory Variables by Type of Observation -- 10.4 Multinomial Logit Estimation Results (Tranquil as Base Category) -- 10.5 Multinomial Logit Estimation Results (Orderly as Base Category).

10.6 Multinomial Logit Results: Gains and Losses in Reserves.