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A two-country NATREX model for the euro/dollar

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  • Belloc, Marianna
  • Federici, Daniela

Abstract

This paper develops a NATREX (NATural Real EXchange rate) model for two large economies, the Eurozone and the United States, which are fully specified and allowed to interact. The theoretical framework, grounded on dynamic disequilibrium modelling approach in continuous time, provides the basis for empirical estimation. The model is estimated in its structural form as a simultaneous nonlinear differential equations system for the 1975-2003 period. The estimated parameters are then used to derive the simulated Euro/USD NATREX series in- and out-of-sample that offers the benchmark against which the misalignements of the actual real exchange rate are measured.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 29 (2010)
Issue (Month): 2 (March)
Pages: 315-335

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Handle: RePEc:eee:jimfin:v:29:y:2010:i:2:p:315-335

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Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: NATREX Equilibrium exchange rate Euro/USD Structural approach Continuous time econometrics Misalignment;

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Cited by:
  1. Nikolaos Giannellis & Minoas Koukouritakis, 2011. "Behavioural equilibrium exchange rate and total misalignment: evidence from the euro exchange rate," Empirica, Springer, vol. 38(4), pages 555-578, November.
  2. Giancarlo Gandolfo, 2012. "The Tobin Tax in a Continuous-time Non-linear Dynamic Model of the Exchange rate," ASSRU Discussion Papers 1221, ASSRU - Algorithmic Social Science Research Unit.
  3. Daniela Federici & Giancarlo Gandolfo, 2011. "The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?," DEGIT Conference Papers c016_035, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Federici, Daniela & Gandolfo, Giancarlo, 2012. "The Euro/Dollar exchange rate: Chaotic or non-chaotic? A continuous time model with heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 670-681.

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