000			01265pab a2200157 454500
008			180718b1999 xxu||||| |||| 00| 0 eng d
100			_aPattanaik, Sitikantha
245			_aREER : the leading indicator
260			_c1999
300			_ap.123-51
362			_aMonsoon
520			_aThis paper empirically evaluates the significance of the REER as a leading indicator of currency crises using the experience of the recently affected Asian economies as a benchmark. The results of the study indicate that while real overvaluations must be corrected in an orderly manner in the medium to long-run, any policy to use exchange rate as an instrument to gain external competitiveness may prove ineffective in the long-run. Estimates suggest that REER misalignments in India get corrected by 7.7 per cent and 6.0 per cent per quarter through nominal exchange rate adjustments and domestic price movements, respectively. Greater exchange rate flexibility and trade/structural reforms facilitating enhanced wage price flexibility, therefore, could be crucial to ensure convergence of cross border prices and avoid sustained misalignment in the exchange rate. - Reproduced
650			_aExchange rates
773			_aReserve Bank of India Occasional Papers
909			_a43794
999			_c43794 _d43794