Methodology for Current Account and Exchange Rate Assessments

This paper discusses the methodologies used by IMF staff to monitor the exchange rate policies of its member countries, and considers the conceptual and empirical issues involved in interpreting the assessments. It provides perspectives on alternative frameworks for assessing exchange rates, and describes some initial efforts to develop a separate methodology for assessing the current account positions of emerging market economies. The focus of this paper is on methodology and interpretive issues, rather than on numerical assessments.