A Darwinian perspective on "exchange rate undervaluation"

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Abstract

This paper studies how status competition for marriage partners can generate surprising effects on the real exchange rate (RER). In theory, a rise in the sex ratio (increasing relative surplus of men) can generate a decline in the RER. The effect can be quantitatively large if the biological desire for a marriage partner is strong. We also provide within-China and cross-country empirical evidence to support the theory. As an application, our cross-country estimation suggests that sex ratio as well as other factors in the existing literature can account for the recent evolution in Chinese RER almost completely.

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APA

Du, Q., & Wei, S. J. (2016). A Darwinian perspective on “exchange rate undervaluation.” European Economic Review, 83, 111–138. https://doi.org/10.1016/j.euroecorev.2015.12.010

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