THE EFFECT OF REAL EXCHANGE RATE DEVİATİON ON EXPORTS İN FRAGİLE FİVE

Abstract

The overvalued exchange rate is an undesirable situation that is mostly undesirable by the decision-making units that implement the economic policy, due to its possible negative effects on exports. In order to interpret that a country's currency is overvalued or undervalued, it is necessary to calculate to what extent the current period real exchange rate deviates from the equilibrium real exchange rate. For this calculation, the basic equilibrium exchange rate (FEER), the desired exchange rate (DEER), the natural equilibrium exchange rate (NATREX), and finally the behavioral equilibrium exchange rate (BEER), which are referred to as modern equilibrium exchange rate models in the literature, are used. Acting in this direction, in the first stage of the analysis of the study, using the data from Bruegel.org5 and the World Development Indicator database of the countries defined as the fragile five and covering the years 1992-2020, the equilibrium real exchange rates were calculated within the scope of the FEER model and the actual deviation values were reached. In the second stage, the deviation values obtained were added to the export equation as a variable and their relationship with export was found. When the results obtained in the study are examined, it is seen that the increase in the undervaluation level in the exchange rate increases the exports of all countries included in the sample, except for Turkey, and the effect of the undervalued exchange rate on exports is negative only in Turkey.