Determinantes del tipo de cambio real en Paraguay (1970 - 2000)

Abstract

We study the long-run determinants of the real exchange rate in Paraguay. Our results show cointegration between the real exchange rate and capital inflows as a percent of GDP, the terms of trade, and openness. We find that the degree of openness reduces the impact of capital flows on the real exchange rate: the more open is the economy, the lesser impact has a capital inflow on the real exchange rate. The dynamic analysis shows that 58 percent of the misalignment of the real exchange rate from its long-run equilibrium is corrected within one year. Finally, our results suggest that in 2000 the local currency was undervalued in real terms by about 9 percent.