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How misaligned is the Australian real exchange rate?

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Author Info
Satish Chand (Asia Pacific School of Economics and Government, The Australian National University)

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Abstract

This paper uses quarterly data from September 1981 to December 2000 to quantify the extent to which the Australian real exchange rate is misaligned relative to its long-run equilibrium value. Our modelling suggest, that as of December 2000, the real exchange rate was seven percent below its equilibrium value; this figure is modest in comparison to purchasing power parity indicators that suggest considerably greater misalignment. Furthermore, once short-run dynamics are accounted for, even this anomaly disappears.

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File URL: http://www.eaber.org/intranet/documents/39/559/APSEG_Chand_01_3.pdf
File Format: application/pdf
File Function: First Version, 2005
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Publisher Info
Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 559.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 32 pages
Date of creation: Aug 2001
Date of revision:
Handle: RePEc:eab:macroe:559

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
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Related research
Keywords: Exchange rates; misalignments; Australia;

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Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation

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  1. Rodriguez, Carlos Alfredo, 1989. "The external effects of public sector deficits," Policy Research Working Paper Series 299, The World Bank. [Downloadable!]
    Other versions:
  2. Sebastian Edwards, 1987. "Exchange Rate Misalignment in Developing Countries," UCLA Economics Working Papers 442, UCLA Department of Economics. [Downloadable!]
    Other versions:
  3. Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," NBER Working Papers 0852, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Shakila Aruman & Mardi Dungey, 2003. "A Perspective on Modelling the Australian Real Trade Weighted Index since the Float," Australian Economic Papers, Blackwell Publishing, vol. 42(1), pages 56-76, 03. [Downloadable!] (restricted)
  5. McKibbin, Warwick J & Vines, David, 2000. "Modelling Reality: The Need for Both Inter-temporal Optimization and Stickiness in Models for Policy-Making," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 106-37, Winter.
  6. Wells, Graeme & Evans, Lewis, 1985. "The Impact of Traded Goods Prices on the New Zealand Economy," The Economic Record, The Economic Society of Australia, vol. 61(172), pages 421-35, March.
  7. Baffes, John & Elbadawi, Ibrahim A. & O'Connell, Stephen A., 1997. "Single-equation estimation of the equilibrium real exchange rate," Policy Research Working Paper Series 1800, The World Bank. [Downloadable!]
  8. Adrian Blundell-Wignall & Robert G. Gregory, 1990. "Exchange Rate Policy in Advanced Commodity-Exporting Countries: The Case of Australia and New Zealand," OECD Economics Department Working Papers 83, OECD, Economics Department. [Downloadable!]
  9. Khan, Mohsin S & Lizondo, J Saul, 1987. "Devaluation, Fiscal Deficits, and the Real Exchange Rate," World Bank Economic Review, Oxford University Press, vol. 1(2), pages 357-74, January.
  10. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May. [Downloadable!] (restricted)
  11. Bruno, Michael & Sachs, Jeffrey, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," Review of Economic Studies, Blackwell Publishing, vol. 49(5), pages 845-59, Special I. [Downloadable!] (restricted)
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