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The aim of this chapter is to provide equilibrium exchange rates values for a large set of currencies and to study the adjustment process of observed exchange rates toward these levels by paying special attention to emerging Asian countries. Relying on panel smooth transition regression models, we show that real exchange rate dynamics in the long run are nonlinear for emerging Asian countries, and linear for the G7 currencies. Especially, there exists an asymmetric behavior of the real exchange rate when facing an over- or undervaluation, the adjustment speed being higher in the case of undervaluation in Asia. Although this result may be explained by the international pressure to limit undervaluation, the undervaluation may still persist over time, as has been observed since the beginning of 1990s.

The aim of this study is to examine whether China’s exchange rate follows an equilibrium process and consequently to answer the question of whether or not China’s international competitiveness fluctuates in consistency with equilibrium.

The theoretical background of the paper relies on the Purchasing Power Parity (PPP) hypothesis, while the econometric methodology is mainly based on a nonlinear two-regime Threshold Autoregressive (TAR) unit root test.

The main finding is that China’s price competitiveness was not constantly following a disequilibrium process. The two-regime threshold model shows that PPP equilibrium was confirmed in periods of relatively high – compared to the estimated threshold – rate of real yuan appreciation. Moreover, it is implied that the fixed exchange rate regime cannot ensure external balance since it can neither establish equilibrium in the foreign exchange market, nor confirm that China’s international competitiveness adjustment follows an equilibrium process.

The results do not imply that China acts as a currency manipulator. However, a main policy implication of the paper is that China should continue appreciating the yuan to establish external balance.

This paper is the first which accounts for a nonlinear two-regime process toward a threshold, which is defined to be the rate of change in China’s international competitiveness. Consequently, the paper draws attention to the role of China’s international competiveness in accepting the PPP hypothesis.

In recent decades, capitalist globalization has entailed a new international division of labor with the relocation of some stages of manufacturing production from the Center to the Periphery through the Global value chains (GVCs). This new pattern of global production is marked by wide income disparities between the different regions of the world economy, accentuated by value transfers hidden within both traditional and GVCs international trade. The chapter presents a theoretical model based on a Marxian approach for the accounting of unequal exchange in international trade in value-added, resulting from the decoupling of value-produced and value-captured inside and outside GVCs. The empirical results show the ongoing relevance of unequal exchange in contemporary capitalism as one of the fundamental causes of disparities in income and economic development among the countries of the global economy.

Czechia's economic growth is substantially dependent on foreign trade. An independent monetary policy in a managed floating exchange rate regime gives a unique perspective on the effects of the exchange rate on foreign trade. This chapter evaluates the effects of exchange rate development on different sectors of Czechia's foreign trade. Using disaggregated data based on trading partner and product category, the period from 1999 to 2020 is analyzed. Czechia's 10 major trading partners are included in the estimation. The relationship between exchange rates and foreign trade is assessed through a Johansen cointegration approach and modified vector error correction model. The results of the Johansen cointegration test indicate that the majority of the aggregate bilateral trade balances are in a long-term relationship with Czechia's gross domestic product (GDP), foreign GDP and exchange rate movements. The J-curve is proved only in chemicals and related products traded with France, manufactured goods traded with Italy and Slovakia and mineral fuels and lubricants traded with the Netherlands.

The aim of this chapter is to assess the real exchange rate misalignments. A smooth transition autoregressive model (STAR) is used for Tunisian exchange market. This model allows us to see whether these differences are temporary or persistent over the period 1975–2012. We start by defining the exchange rate’s fundamental determinants to provide the equilibrium exchange rate value. Then, we study the observed exchange rate adjustment toward its equilibrium level. Vector autoregressive model and vector error correction model are applied to characterize the joint dynamics of variables in the long run. The results indicate a long-run relationship between variables. In order to consider the nonlinearity for better results, we will move to nonlinear smooth transition model. We found there is a high degree of exchange rate misalignment. We recognized that this difference decreases in the long run and disappears at the end.