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Real Exchange Rate Misalignment in Azerbaijan

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  • O24 - Trade Policy
  • Factor Movement Policy
  • Foreign Exchange Policy
  • C22 - Time-Series Models
  • Dynamic Quantile Regressions
  • Dynamic Treatment Effect Models
  • F31 - Foreign Exchange
  • Political Science


By using quarterly data from 2001-2007 and applying various approaches, we estimate real equilibrium exchange rate misalignment for Azerbaijani Manat (AZN) and find that AZN is slightly overvalued. Purchasing power parity approach does not explain the equilibrium exchange rate. However using behavioral and permanent equilibrium exchange rate approaches, we find that the relative productivity, terms of trade, trade openness, net foreign assets, government expenditures and oil prices are the main determinants of misalignment.

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