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Globalization, exports, and effective exchange rate indices
Journal of International Money and Finance
  • Lok Sang HO, Lingnan University, Hong Kong
Document Type
Journal article
Publication Date
Pergamon Press
  • Effective exchange rate indices,
  • Real effective exchange rate indices,
  • GDP-weighted effective exchange rates,
  • Globalization,
  • Estimated exports functions

This paper offers a new way of compiling effective exchange rate indices, which is then shown to perform generally better in prototype equations explaining total real exports than other published indices. Researchers can use this method to compile effective exchange rates, real or nominal, readily for any country. The generally superior performance, based on cointegration tests using data from four major economies, four Latin American countries, and four South East Asian countries, suggests the proposed index which uses GDP weights rather than trade weights, is more appropriate in a highly globalized world. Intensified globalization in the past two decades appears indicated by the higher elasticities of exports with respect to the real effective exchange rate over time.

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Copyright © 2011 Elsevier Ltd.

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Citation Information
Ho, L. S. (2012). Globalization, exports, and effective exchange rate indices. Journal of International Money and Finance, 31(5), 996-1007. doi: 10.1016/j.jimonfin.2011.12.007