Do labor market distortions cause overvaluation and rigidity of the real exchange rate

Liberalization of the labor market would substantially reduce or prevent overvaluation of the real exchange rate. ThePolicy. Reseatch. and External Affairs Complex distributes PRE Working Papess to disseminate the findings of work in progress and to arcownge the exchange of ideas among Bank staff and all othas inteested in development issues. These papers cary tde names of the authors, reflect only their views, and should be wed and cted accordingly. The findings, interpmetations, and conclusions am the authotos own. They should not be attributed to the World Bank, its Board of Directors, its mnnaganent, or any of its member counties. Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed