精酿啤酒 探寻实际汇率的核心驱动因素

European

commission

EconomicandFinancialAffairs

AWell-CraftedBEER:

IdentifyingtheFundamentalDriversofRealExchangeRates

MirjamSalish,MathildeDufouleur,MilanVýškrabkaand

StefanZeugner

EUROPEANECONOMY

DISCUSSIONPAPER254|JULY2026

EuropeanCommission

Directorate-GeneralforEconomicandFinancialAffairs

AWell-CraftedBEER:

IdentifyingtheFundamentalDriversofRealExchangeRates

MirjamSalish,MathildeDufouleur,MilanVýškrabkaandStefanZeugner

Abstract

Thispaperpresentsnewempiricalevidenceonthedeterminantsofrealeffectiveexchangerates(REERs)usinganovelcomprehensivedatasetof76countriesfrom1995to2022,withafocusonlevelREERs.Inadditiontogrosstradeweights,weincorporatetradeinvalue-addedweightstoaccountforglobalvaluechains’impactonexchangeratesandmacroeconomicimbalances.Usingadvancedmodelselectiontechniques,weidentifykeyfundamentalfactorsdrivingREERsandshowthattheresultingmodeloutperformsalternativesintermsofrobustnesswithouthavingtosacrificein-samplefitorout-of-samplepredictiveaccuracy.WeexploitlevelREERstoanalysepricelevelconvergence.REERmisalignmentsnarrowslowlyovertime,withconvergingeconomiesshowingfasteradjustmentrates.Applicationsofthemodelallowustoanalysetheimpactoffundamentals,suchasdemographicchange,onconvergence,aswellastostudyexchangeratemisalignmentsatthegloballevel,offeringacomplementary,price-basedperspectiveonglobalimbalances.

JELClassification:C33,F31,F41,F37.

Keywords:behaviouralequilibriumexchangeratemodel,exchangerates,economicfundamentals,misalignment,value-addedtrade,globalvaluechains,convergingeconomies,convergence.

Acknowledgements:MirjamSalishconductedthisworkwhileaffiliatedwiththeEuropeanCommission.WethankAlzbetaAndrikovaforexcelenteresearchassistance.WewouldfurtherliketothankRudolfsBems,MenzieChinn,LeonorCoutinho,ClaireGiordanoandMartinSchmitzaswellasseminarparticipantsattheJRC-ECFINinternalseminar,theEC-CEPR-JIEconference“GlobalShocks,MacroeconomicSpilloversandGeopoliticalRisks:PolicyChallenges”,the4thConferenceonInternationalSustainableandClimateFinance/InternationalFinancialIntegration,the13thAnnualConferenceoftheInternationalAssociationforAppliedEconometrics,the3rdInternationalConferenceontheClimate–Macro–FinanceInterfaceandtheworkshoponChallengestoGlobalTradeandCompetitivenessoftheEuroAreaforvaluablecommentsandsuggestions.

Contact:MirjamSalish,mirjam.salish@ec.europa.eu,EuropeanCommission,Directorate-GeneralforEconomicandFinancialAffairs

andOesterreichischeNa

tionalbank.MathildeDufoulcur,BanquedeFrance.

MiIanVýškrabka,milan.vyskrabka@eceuropa.eu,EuropeanCommission,Directorate-GeneralforEconomicandFinancialAffairs.StefanZe

ugner,stefan.zeugner@ec.euro

pa.eu,EuropeanCommission,Directorate-General

forEconomicandFinancialAffairs.

EUROPEANECONOMYDiscussionPaper254

2

CONTENTS

1Introduction

4

2Relatedliterature

5

3Data

7

3.1Sample

7

3.2Dependentvariable:REERlevel

8

3.2.1Tradeinvalueaddedweights

9

3.2.2Grosstradeweights

9

3.3Explanatoryvariables

10

4Empiricalstrategy

10

5Variableselection

12

5.1DeterminantsoftheREERbasedoneconomictheory

12

5.2Data-drivenvariableselection

13

5.3Samplesplits

17

5.4Modelperformancecomparison

19

6Regressionresults

23

7REERmisalignments

24

7.1Applications

27

7.1.1Convergence

27

7.1.2Globalmisalignments

31

7.1.3Disruptionsofglobalvaluechains

32

8Conclusion

32

ANNEXI

38

I1Countrysamples

38

I2Countrygroups

38

I3Buildingthetradematrix

38

3

TABLES

1BMAresults-value-addedweights76countries

15

2VariablesselectedbasedonBMAandRF

17

3Modelcomparisonacrosstradeweightsandcountrysamples

21

4Panelregressionresults-baselinemodel

23

5REERadjustments

29

6MacroeconomicfundamentalsandthespeedofREERadjustment

30

7ExchangerateregimeandthespeedofREERadjustment

30

A.1Descriptionofvariablesandtransformation

40

A.2BMAresults-topperformingvariablesacrosssamples

45

A.3Randomforest-topperformingvariablesacrosssamples

46

A.4BMAandRFsurvivaltable

47

A.5Testingforslopehomogeneity

51

GRAPHS

1Value-addedvs.grosstradeweights,2018

10

2Modelselectionprocess

11

3REERvs.relativeincome

13

4Standardisedslopecoefficientsfromcross-sectionalsamplesplits

19

5Evolutionofslopecoefficientsovertime

20

6R2andRMSEacrossmodelsandcountrysamples

22

7REERsandbenchmarks1995-2022

26

8PPPandmodeluncertainty

26

9REERsandbenchmarks

27

10REERgapsandREERchanges

28

11Globalmisalignments

31

12ChangeinREERbenchmarksin2021

32

A.1Correlationbasedclusteranalysis

52

A.2Hierarchicalclusteringdendrogram

53

A.3Standardisedslopecoefficientsfromcross-sectionalsamplesplits

54

A.4Standardisedslopecoefficientsfromcross-sectionalsamplesplits

54

A.5Standardisedslopecoefficientsfromcross-sectionalsamplesplits

55

A.6Differencebetweenaugmentedandnon-augmentedREERgaps

55

A.7DecompositionofREERbenchmarks

56

A.8Differencebetweenvalue-addedandgross-tradeweightedmedianREERgaps

57

4

EuropeanEconomyDiscussionPaperAwell-craftedBEER:Identifyingthefundamentaldriversofreal

exchangerates

1.INTRODUCTION

Understandingtherelationshipbetweenacountry’spricelevelandthoseofitstradingpartnersisacentralconcernformacroeconomicpolicy.Currencyandpricefluctuationscanhaveastrongimpactoneconomicgrowthandoveralleconomicstability(

Rogoff

,

1996

,

EngelandRogers

,

1996

,

ObstfeldandRogoff

,

2000

).Prolongedmisalignmentsofrealexchangeratesmayexposeacountry’sexternalposition,increasevulnerabilities,andraisetheriskoffinancialcrises,withpotentialspilloverstoothereconomies(

Kaminsky

andReinhart

,

1999

,

Edwards

,

2002

,

Krugman

,

1979

).Forthisreason,macroeconomicsurveillancecloselymonitorswhetherwagesandpricesadjustatanappropriatepaceandwhetherrealexchangeratedevelopmentsareconsistentwithunderlyingstructuralconditions.SuchassessmentsplayanimportantroleinpolicydecisionsbyinstitutionssuchastheEuropeanCommission,includinginthecontextofeuroadoption.1

Cross-countrydifferencesinpricelevelsaretypicallysummarisedbyrealeffectiveexchangerates(REERs),constructedasweightedaveragesofbilateralexchangeratesadjustedforInflationdifferentialsand,inthecaseoflevelREERs,forrelativepricelevelsusingpurchasingpowerparities(PPPs).REERsprovideacompactsummaryofrelativepricepositionsacrosscountriesandareusedinmacroeconomicsurveillancetoassesspriceconvergenceandexternaladjustmentpressures.Theequilibriumexchangerateiscommonlydefinedastheexchangerateconsistentwithacountry’slong-termfundamentalcharacteristicsandfreefromtemporaryshocksorpolicydistortions.Deviationsfromthisbenchmarkgiverisetoexchangeratemisalignments,whichmaypersistovertimeifadjustmentthroughrelativepricesissloworincomplete:persistentovervaluationsmayundermineexportcompetitivenessandstraincurrentaccounts,whileundervaluationscangenerateInflationarypressuresandtradetensions.Alargeliteraturehasdevelopedmethodstoestimateequilibriumexchangeratesandtoanalysethedriversofrealexchangeratemovements,withbehaviouralequilibriumexchangerate(BEER)modelswidelyusedinpolicyinstitutionsforsurveillancepurposes.

BEERmodelslinkrealexchangeratedynamicsto(economic)fundamentalsandtemporaryfactorsinareduced-formframework,typicallybyestimatingaco-integratingrelationshipbetweentheREERandasetofslowlymovingdeterminants(

MacDonald

,

1998

;

Schmitzetal.

,

2012

;

Phillipsetal.

,

2013

;

Fidora

etal.

,

2021

).WhileearlyapplicationsfocusedprimarilyonREERindicesandtime-seriesdynamics,recentdataadvanceshaveenabledashifttowardsanalysingREERsinlevels,allowingresearcherstoexploitcross-countryvariationinpricelevelsandrelatethemtofundamentalcharacteristicssuchasincomelevels,ordemographics(see,amongothers,

Manoetal.

,

2019

foraREERlevelmodelintheIMF’sExternalBalanceAssessmentor

Coutinhoetal.

,

2021

).AnalysingREERsinlevelsprovidesinformationontheabsolutevaluationofcurrenciesandenhancescross-countrycomparability,whichisparticularlyrelevantforcountriesundergoingincomeconvergenceandstructuraltransformation.

Despitetheirwidespreaduse,BEERmodelshavefoundtobesensitivetoindicatorchoice,countrycoverage,sampleperiods,andeconometricspecification(

AdlerandGrisse

,

2017

).Thissensitivityraisesconcernsabouttherobustnessofestimatedbenchmarksand,byextension,ofassessedmisalignments.Againstthisbackground,themainobjectiveofthispaperistodeveloparobustprice-levelassessmentframeworkforREERs.WedevelopaBEERmodelusingalargeandheterogeneouspanelofcountries,withtworelatedaims.First,themodelprovidesbenchmarksforrelativepricelevelsbasedon(macroeconomic)fundamentals,whichcanbeusedtoassessmedium-termexchangeratemisalignments.Second,itallowsustoanalysehowquicklyobservedpricelevelsconvergetowardsthesebenchmarksintheabsenceofpolicyintervention.

ThecorecontributionofthepaperliesinidentifyingaparsimoniousandrobustspecificationforexplainingREERlevels.Tothisend,weconstructanovelandcomprehensivedatasetcovering76countriesovertheperiod1995–2022,includingabout45economic,policyanddemographicindicatorssuggestedbytheliterature,aswellasaround400interactiontermstocapturepotentialnon-linearities.REERsareconstructedusingbothgrosstradeweights(

Schmitzetal.

,

2012

)andvalue-addedtradeweights(akinto

BemsandJohnson

,

2012

),allowingustoassesstheroleofglobalvaluechains.Weemployamulti-stepempiricalstrategycombiningeconomicpriorswithdata-drivenvariableselectiontechniques.

1Formoreinformationonconvergenceandeuroadoption,seee.g.convergencereports,

Commission

,

2024

.

EuropeanEconomyDiscussionPaperAwell-craftedBEER:Identifyingthefundamentaldriversofreal

exchangerates

5

Specifically,weuseBayesianModelAveragingandRandomForeststoassessindicatorrelevanceacrossalternativecountrysubsamples,weightingschemes,andmodelspecifications;complementtheseresultswithinformationonjointnessandclusteringamongvariables;andsubjectcandidatespecificationstoextensiverobustnesschecksbasedonrandomsamplesplitsalongboththecountryandtimedimensions.

OurresultsshowthatonlyalimitedsetoffundamentalscanrobustlyexplainREERlevelsacrossheterogeneouscountrygroups.Relativeincome,capturingproductivitydifferentialsandtheBalassa–Samuelsoneffect,emergesconsistentlyasthemostsignificantdeterminantacrossallselectionmethods,samples,andweightingschemes.Tradeopenness,capitalaccountclosedness,anddemographicvariables—suchaspopulationgrowthandtheold-agedependencyratio—alsoprovetobeimportantdrivers.WefindthatvaryingtradeweightsorexcludingmajorcrisisperiodssuchastheGlobalFinancialCrisisortheCOVID-19pandemichasrelativelylittleimpactontheslopecoefficientsandmodelperformance,whereasthecompositionofthecountrysampleisakeydeterminantofindicatorrelevance.Anumberofindicatorsfrequentlyusedintheliterature,includingsomepolicy-relatedvariables,arefoundtobesignificantonlyinspecificcountrysubsamples.

Thepreferredspecificationachievesahighdegreeofrobustnesswithoutsacrificingin-samplefitorpseudoout-of-samplepredictiveaccuracyandperformsatleastaswellasexistingpolicymodelsusedforREERsurveillance,whilebeinglesssensitivetosamplevariation.Focusingonslow-movingfundamentalsallowsustoderivemedium-termREERbenchmarksandcorrespondingmisalignments.Formostcountries,observedREERsarebroadlyalignedwiththesebenchmarks,althoughsomeexhibitpersistentover-orundervaluationsreflectingsloworincompleteprice-leveladjustment.Aggregatingcountry-levelgaps,wedocumenttheevolutionofBEER-impliedglobalrealexchangeratemisalignments,interpretedaschangesinsystem-widerelativepricedispersion.Largeeconomieswithacentralroleinglobaltradearefoundtoaccountforasubstantialshareofthesedynamics.

Theframeworkfurtherallowsustoanalyseadjustmentdynamicsandtheroleofglobalshocks.WefindthatREERmisalignmentstendtounwindslowly,withconvergenceratesdifferingacrosscountrygroupsanddependingonstructuralcharacteristicssuchasdemographicsorinstitutionalquality.Periodsassociatedwithmajordisruptionstotradepatterns,suchastheCOVID-19pandemic,arecharacterisedbylargerchangesinbenchmarks,reflectingshiftsinrelativedemand,supplychains,andeconomicresilience.Whilebenchmarksandmisalignmentsderivedfromgrossandvalue-addedtradeweightsarebroadlysimilarformostcountries,differencesbecomemorepronouncedduringsuchepisodes,highlightingtherelevanceofglobalvaluechainsforcompetitivenessassessments.Takentogether,theseresultsemphasisethepolicyrelevanceofrobustREERbenchmarksforidentifyingpersistentimbalances,assessingadjustmentneeds,andinformingmacroeconomicandstructuralpolicies.

Theremainderofthepaperisstructuredasfollows.Section

2

reviewstherelatedliterature.Section

3

describestheconstructionofthedatabase.Section

4

outlinestheempiricalstrategy.Section

5

presentstheresultsofthevariableselectionprocedures.Section

6

discussesthepanelregressionresults.ExchangeratemisalignmentsandadjustmentdynamicsareanalysedinSection

7

.Section

8

concludes.

2.RELATEDLITERATURE

GiventheimplicationsoflargeandpersistentREERforeconomicstability,assessingdeviationsofexchangeratesfromtheirequilibriumvaluesisessentialforinternationalpolicyinstitutions,financialinstitutionsandcentralbanks.ThemostcommonlyusedmodelstoassessREERmisalignmentsarePurchasingPowerParity(PPP),behaviouralEquilibriumExchangeRate(BEER),NaturalRealExchangeRate(NATREX),andtheFundamentalEquilibriumExchangeRate(FEER).Eachapproachprovidesadifferentperspectiveonhowexchangeratesadjusttoeconomicfundamentalsovertime.

PPPisbasedontheideathatthepriceofabasketofgoodsandservicesshouldbethesameintwocountriesafteradjustingfortheexchangerate(see

Rogoff

,

1996

,

Samuelson

,

1964

).TheNATREXmodelassumestheexchangeratetograduallymovetowardsa‘natural’levelinthelongrunreflectingexternalandinternalequilibrium(

Stein

,

1990

).Internalequilibriumisreachedwhentheoutputgapisclosed,whileexternalequilibriumoccurswhenthecurrentaccountbalanceis‘sustainable’giventhecountry’s

EuropeanEconomyDiscussionPaperAwell-craftedBEER:Identifyingthefundamentaldriversofreal

exchangerates

6

targetnetforeignassetposition(

Fidoraetal.

,

2021

).TheFEERmodel,similarlytoNATREX,definestheequilibriumexchangerateastheonethatsimultaneouslyensuresinternalandexternalbalance(

Williamson

,

1983

).UnlikeNATREXmodels,whichderivethecurrentaccountasanoutcomeofsavingandinvestmentbehaviour,theFEERframeworktakesanormativeapproachandexplicitlytargetsadesiredcurrentaccountbalance(

ClarkandMacDonald

,

1999

,

SaltoandTurrini

,

2010

).TheBEERmodel,developedby

Faruqee

(

1995

)and

MacDonald

(

1998

),isanempiricallydrivenapproachthatexplainsexchangeratedynamicsbasedonobservablemacroeconomicdrivers.Theframeworkestablishesabenchmarkrealexchangeratebyestimatingareduced-formco-integratingrelationshipbetweentheREERanditseconomicdeterminants(

Fidoraetal.

,

2021

).

Ourmainobjectiveistoassesstheleveloftherealexchangeratethatisconsistentwithacountry’smacroeconomicfundamentals.Indoingso,wefocusonidentifyingthecross-sectionaldeterminantsofREERlevelswhilealsoaccountingfortheirtime-seriesdynamicsinapanelsetting.Ourapproachiscloselyrelatedtotheframeworkproposedby

Manoetal.

(

2019

),whichmodelsREERlevelsasafunctionofslowlymovingeconomicfundamentals.2Likethisstrandoftheliterature,weemployaBEER-typepanelregressiontodistinguishbetweenfundamentaldriversofequilibriumpricelevelsandotherfactorsthataccountfortemporarydeviations.

EarlyempiricalworkonthefundamentaldriversofrealequilibriumexchangeratesfocusedondemonstratingtheBalassa-Samuelsoneffectwhichstatesthatcountrieswithstrongergrowthintradedgoodsshouldseeanappreciationoftheirrealexchangerate(seee.g.,

Maeso–Fernandezetal.

,

2002

,

Chinn

,

2005

,

Riccietal.

,

2013

,

MacDonaldandDias

,

2007

).Otherfactorsthatarecommonlyidentifiedasfundamentalsaredemographiccharacteristicsofthecountry,fiscalvariables,commoditypricesandtradeopenness,butstudieshavealsotestedotherdeterminantssuchascapitalaccountclosedness,institutionalquality,geography,sectoralproductivitydifferentials,exchangerateregimesandnaturalresourceendowmenttonameafew(seee.g.,

Fujii

,

2013

or

Cheungetal.

,

2019

).

Whilemanyofthesedeterminantsarefoundtobesignificantandconsistentwitheconomictheory,therobustnessofBEERmodelshasbeendiscussedinvariouspapers(seee.g.,

Maeso–Fernandezetal.

,

2002

or

AdlerandGrisse

,

2017

).First,non-linearitiesseemtoplayarole,andseveralauthorsfindtherelationshipbetweentheREERandthefundamentalstobecharacterisedbyvariationovertime(seee.g.

Ca’ZorziandRubaszek

,

2023

,

Muscatellietal.

,

2007

,

Cuestasetal.

,

2022

or

Hillebrandetal.

,

2023

).Eventhoughsomeslopecoefficientschangeduringepisodessuchastheglobalfinancialcrisis,wecannotconfirmthisfindingingeneral,asmostofourcoefficientestimatesarefairlyrobusttowardschangesinthetimeperiod.Additionallyandincontrastto

AdlerandGrisse

(

2017

),thecombinationofexplanatoryvariableshasonlyalimitedeffectontheslopecoefficients.However,weconfirmtheirfindingthattheBEERmodelissensitivetothesetofcountriesincludedinthepanel.Thisresultisalsoinlinewith

Bénassy-Quéréetal.

(

2009

)whoshowthatdespiteBEERestimatesbeingrelativelyrobust,thecountrysampleaswellasthechoiceoftheproductivityproxyarethemostlikelysourcesoflargerdifferencesinmisalignments.Similarto

Fujii

(

2013

),whohighlightsthatsomeofthefundamentaldriversareonlyrelevantindevelopingcountriesandothersonlyinadvancedeconomies,wefindthatsomevariablesonlymatterforcertaincountrysubsets.Themostimportantdriverssuchasrelativeincomeare,however,robusttocountrysubsamples.

Differencesincoefficientestimatesandimportanceacrosscountrysubsetssuggestpotentialslopeheterogeneity.Thisisalsonotedby

AdlerandGrisse

(

2017

)whopointoutthat,althoughlargerpanelsallowformorepreciseparameterestimation,theassumptionofidenticalslopecoefficientsbecomesincreasinglyproblematicaspanelheterogeneityincreases.Toaddressthis,wetestandconfirmthepresenceofslopeheterogeneityandthereforeestimateanaugmentedmodeltorectifypossiblebiasintroducedbythisheterogeneity(see

PesaranandYamagata

,

2008

,

BreitungandSalish

,

2021

).

ToovercomelimitationsofconventionalmeasuresofREERmodelsinthecontextofincreasingglobalsupplychains,

BemsandJohnson

(

2012

)introducetheconceptofthevalue-addedREER,whichadjuststhetraditionalREERmodeltoreflectverticalspecialisationintrade.Theyshowthatvalue-addedweightedREERscandivergesignificantlyfromconventional(grosstradeweighted)REERs.Forsomecountries,wefinddistinctpatternsinyearsthatsawlargershiftsintraderelationshipssuchasthepandemic,highlightingthatadistinctioncanbeimportantingaugingthecompetitivenessofacountryduringsuch

2TheIMFhascontinuouslyrefineditsmethodologytoassesstheexternalpositionofcountries,publishingupdatesinitsExternalBalanceAssessmentnotes,withthelatestmethodologicaladvancesoutlinedin

Allenetal.

,

2023

.

EuropeanEconomyDiscussionPaperAwell-craftedBEER:Identifyingthefundamentaldriversofreal

exchangerates

7

periods.

AlthoughBEERmodelsgenerallyoutperformtherandomwalk,theirpredictiveaccuracyisoftenonlymarginallybetterthanPPP(

Cheungetal.

,

2019

,

Ca’ZorziandRubaszek

,

2023

).Comparingawiderangeofmodels,

Cheungetal.

(

2019

)findnospecificationthatconsistentlydominatesacrosstimeorevaluationmetrics,andevidencesuggeststhataddingmorefundamentalscanevenworsenout-of-sampleperformance(

Ca’ZorziandRubaszek

,

2023

).Examiningtheone-yearaheadRMSEaspartofourperformancemeasures,wefindthatlargermodelstendtoperformslightlybetter.However,themostnotabledifferencesinpredictiveaccuracyemergenotacrossmodelspecificationsbutacrosscountrysubsetswithaccuracybeinghigherforOECDcountriesthanfornon-OECDcountriesacrossmodels.

Recentworkhasemphasisedthatdeviationsofrealexchangeratesfromfundamentalsmayalsoreflecttheinfluenceofmacroeconomicandfinancialshocks.Suchshockshavebeenshowntoaccountforalargeshareofshort-runexchangeratefluctuationsand,insomecases,persistentdeviationsfromequilibrium(

ItskhokiandMukhin

,

2021

;

Miyamotoetal.

,

2023

).Arelatedstrandoftheliteraturedistinguishesbetweenpermanentandtransitoryforcesinexchangeratedynamics.Usingapermanent–transitorydecomposition,

ChenandChou

(

2015

)showthatexchangeratefluctuationsaredominatedbytransitoryshocks,whereaseconomicfundamentalsevolvemainlywithpermanentshocks,offeringanalternativeperspectiveontheexchangeratedisconnectpuzzle(

ObstfeldandRogoff

,

2000

).Consistentwiththisview,

Bjørnlandetal.

(

2024

)highlightsthatpersistentrealexchangeratemovementsareshapedprimarilybyslow-movingrealfactorssuchasproductivitytrends,ratherthanbyshort-termmonetaryorfinancialshocks.Morerecently,

MagudandPienknagura

(

2023

)documentthatglobaluncertaintyandfinancialconditionshockshaveparticularlystrongeffectsinthetailsoftheREERdistribution,especiallyineconomieswithweakermacroeconomicfundamentals.

Exchangeratesaregenerallyfoundtoadjustovertimeinresponsetomisalignments(see,e.g.,

Ca’Zorzi

andRubaszek

,

2023

,

Coutinhoetal.

,

2021

),andalargeliteraturediscussesexchangerategapsandimpliedadjustmentpathswithinBEERframeworks(e.g.

MacDonaldandDias

,

2007

;

Fidoraetal.

,

2021

).Fortheeuroarea,

Fidoraetal.

(

2021

)showthat,whilemisalignmentsarerelativelysmall,theytendtobepersistent,withinstitutionalqualityplayinganimportantroleinshapingthespeedofadjustment.OurresultsareconsistentwiththisliteratureinshowingthatREERmisalignmentstendtonarrowovertimebutthatthespeedandcompletenessofadjustmentvarysystematicallyacrosscountriesandstructuralcharacteristic