Rosser Jr, John Barkley wrote:
>Thus, I was sticking my neck out in saying the East
>Asian currencies are undervalued. But they certainly are
>on PPP grounds (determined by productivity and price
>levels). And old models by Dornbusch and others show that
>with fixed prices and wages a shock in the foreign currency
>market usually leads to an overshoot. This looks like one.
>The devaluations have gone too far. How long it will take
>for them to go back is another question.
At the time of the peso collapse, a market savant named Jim Bianco of Arbor
Trading in Chicago, went through his database and discovered that no
currency that lost 50% or more of its value in a single swoon ever
recovered its value. (He has some $20,000 machine with a huge database that
takes natural language queries.) So for what it's worth, history isn't on
the rupiah's side.
Doug
