More investment and exports and a competitive real exchange rate can also give a temporary boost.
However, an increase in the real exchange rate need not require a rise in the nominal rate.
"At a stroke, Greece can lower its real exchange rate and therefore be more competitive, " Mr. Bootle says.
China's big surpluses and America's big deficits depend on the real exchange rate between them and all of their trading partners.
But almost all poorer countries look cheap by this gauge, and over the past decade China's real exchange rate has risen.
Lithuania's industry has been slower to restructure than Estonia's, and it has lost competitiveness as the real exchange rate has appreciated.
The ADB's economists find that trade in parts is much less sensitive to changes in the real exchange rate than trade in finished products.
And already, because of inflation in Brazil and price deflation in Argentina, the real exchange rate between them is close to its pre-devaluation level.
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Its real exchange rate (which takes account of differences in inflation between Japan and its trading partners) fell to a 23-year low last month (see chart).
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In other words, these measures have had almost no mid-term impact on the dollar-real exchange rate because investments of all kinds continue flowing into this country.
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And if one looks at the real exchange rate--essentially taking into account price differences between the U.S. and China--the yuan has actually depreciated against the dollar.
Only by tightening internal liquidity and allowing the real exchange rate to fall will competitiveness be restored as the economy will shift resources to the tradable sector.
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Mr Svensson argues that the yen needs to be pushed to an undervalued level, from which the public would then expect an appreciation of the real exchange rate.
To sustain its catch-up with America, China needs to rebalance its economy away from exports towards consumer spending, which will require a rise in its real exchange rate.
Some economists argue that as China gets richer it needs to allow its real exchange rate to rise, in order to reap the full gains of its economic success.
This implies that it is natural for China's exchange rate to be below its PPP, but as it gets richer and productivity rises, its real exchange rate should rise.
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And if a devaluation cannot be used to reduce real wages, the real exchange rate overvaluation will be undone via a slow and painful process of wage and price deflation.
It would oblige Argentina to continue trying to adjust its real exchange rate by deflation (cutting nominal wages and prices in nominal terms), a process which has already forced the collapse of many businesses.
Unless this extra domestic currency is mopped up in some way, the money supply rises, banks ramp up their lending, and inflation can take off (which would increase the real exchange rate ie, taking inflation into account and reduce competitiveness).
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Conservatively speaking, then, it appears that over the past couple of years, the real exchange rate of the yuan, deflated by unit labor costs, has been appreciating against the dollar at a rate of something like 15 percent per year.
It seems the Ministry of Finance has ceded foreign exchange rate policy back to the Central Bank where it belongs. the bank has, for now, won the policy argument that further weakening of the real will be inflationary and lead to a stronger real exchange rate, says Tony Volpon, managing director at Nomura Securities in New York.
Argentina is yet another country which has exchanged instability in its nominal economy, with a floating exchange rate, for instability in its real economy with a fixed exchange rate.
Between mid-2005 and mid-2009, China's real trade-weighted exchange rate appreciated by about 5.5% a year.
The fundamental difference is that under a fixed exchange rate real income declines must come through nominal income declines.
In mid-October, in real terms, the exchange rate was where it was in 1991, when Brazil had huge trade surpluses, according to Arminio Fraga, the Central Bank's president.
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Because Entropia has a real cash economy (players can exchange Project Entropia Dollars for real U.S. dolllars at a fixed 10:1 exchange rate), virtual entrepreneurs can start real moneymaking businesses in the game.
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The exchange rate is 100 real dollars to purchase 650 Farm Cash.
Mr Velloso is worried about possible further weakness in the exchange rate (the real depreciated by 17% against the dollar in the last three months of 2008), and also by the ability of Brazilian companies to roll over their debt.
First, however, the government must stop the overshooting in the exchange rate that took the real to 2.25 to the dollar earlier this month.
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