A Two-Country NATREX Model for the Euro/Dollar
AbstractThis 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. After description of the theoretical framework grounding on dynamic disequilibrium modelling approach in continuous time, we implement empirical analysis. First, we estimate the model in its structural form as a simultaneous nonlinear differential equation system for the 1975-2003 period. Second, we simulate the Euro/USD NATREX series in- and out-of-sample by using parameters estimates. The simulated equilibrium real exchange rate enables us to determine a benchmark against which the dynamics of the actual real exchange rate can be measured.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2290.
Date of creation: 2008
Date of revision:
NATREX; equilibrium exchange rate; Euro/USD; structural approach; continuous time econometrics; misalignment;
Other versions of this item:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
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- 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.
- Daniela Federici & Giancarlo Gandolfo, 2011.
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3420, CESifo Group Munich.
- 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.
- Giancarlo Gandolfo, 2012. "The Tobin Tax in a Continuous-time Non-linear Dynamic Model of the Exchange rate," ASSRU Discussion Papers, ASSRU - Algorithmic Social Science Research Unit 1221, ASSRU - Algorithmic Social Science Research Unit.
- Nikolaos Giannellis & Minoas Koukouritakis, 2011.
"Behavioural equilibrium exchange rate and total misalignment: evidence from the euro exchange rate,"
Springer, vol. 38(4), pages 555-578, November.
- Minoas Koukouritakis & Nikolaos Giannellis, . "Behavioural Equilibrium Exchange Rate and Total Misalignment: Evidence from the Euro Exchange Rate," Working Papers, University of Crete, Department of Economics 0901, University of Crete, Department of Economics.
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