CEPII, Recherche et Expertise sur l'economie mondiale
EQCHANGE annual assessment 2020


Carl Grekou

 Points clés :
  • The US dollar was still overvalued; the Chinese renminbi appeared broadly in line with its fundamental value; the British pound, the Canadian dollar and the Japanese yen were moderately undervalued.
  • Europe appeared as the most heterogenous region; Germany, Ireland, Norway, Sweden, and the United Kingdom displayed undervaluations; Finland, France, Italy and Luxembourg were close to their equilibrium; Belgium, Austria, Greece, Portugal and Spain displayed overvaluations.
  • Movements in the EMEs (e.g. Brazil, India, Indonesia, Russia) have been generally upwards and resulted in a reduction/an increase of the undervaluations/overvaluations; in Turkey, the inflation spur countered the nominal depreciation of the lira and let the undervaluation broadly unchanged.
  • Overall and despite the changes observed during 2019, the global configuration of currency misalignments between 2018 and 2019 remained broadly unchanged.

 Résumé :
This publication, accompanying the 2020’s update of EQCHANGE, aims at providing an overview of exchange rate misalignments for 2019. In a nutshell, changes in the exchange rate misalignments on the eve of the Covid-19 pandemic have been relatively modest except few EMEs and DCs that registered large swings. This is especially the case of Egypt, India and Nigeria, and to a lesser extent of Brazil, Indonesia and Thailand. The Turkish lira, despite a continued plunge, maintained its large undervaluation due to the inflation spur. The US dollar, owing to its appreciation, registered a small increase in its overvaluation. The currency movements vis-à-vis the US dollar shaped most of the dynamics in the advanced economies that generally registered downward movements in the currency misalignments. This holds also for the Chinese renminbi that still appear broadly in line —with its fundamentals— despite a depreciation. In Europe, Germany, Ireland, Norway, Sweden, and the United Kingdom displayed undervaluations; Finland, France, Italy and Luxembourg were close to their equilibrium; and Belgium, Austria, Greece, Portugal and Spain displayed overvaluations.

 Mots-clés : EQCHANGE | Exchange Rates | Currency Misalignments | Global Imbalances

 JEL : E3, E4, E5, E6, F3; F4
CEPII Working Paper
N°2020-16, December 2020

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Monnaie & Finance
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