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Estimation of real equilibrium exchange rates

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  • Jan Hansen
  • Werner Roeger
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    Abstract

    The purpose of this paper is to provide a consistent and transparent theoretical and empirical framework to analyse real effective equilibrium exchange rates for a large number of industrial countries. The theoretical and empirical model, as well as the applied methodology, are closely related to a recently published working paper by the IMF (Alberola et.al (1999)).In the theoretical part, a macroeconomic model of internal and external equilibrium is presented (chapters 2, 3 and 4). The empirical part estimates a simplified version of the theoretical model and results are thereafter reported and evaluated on a country by country basis (chapter 5). The purpose of the empirical part is not to arrive at point estimates for equilibrium exchange rates, but rather to provide some basic econometric evidence as a complement and illustration of the theoretical analysis. The empirical model and statistical methodology is kept simple and uniform for all countries in order to facilitate interpretation and evaluation of the results.

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    File URL: http://ec.europa.eu/economy_finance/publications/publication11128_en.pdf
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    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 144.

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    Length: 70 pages
    Date of creation: Sep 2000
    Date of revision:
    Handle: RePEc:euf:ecopap:0144

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    Related research

    Keywords: exchange rates; modelling;

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    Cited by:
    1. Regling, Klaus & Deroose, Servaas & Felke, Reinhard & Kutos, Paul, 2010. "The Euro After Its First Decade: Weathering the Financial Storm and Enlarging the Euro Area," ADBI Working Papers 205, Asian Development Bank Institute.
    2. Heimonen, Kari, 2009. "The euro-dollar exchange rate and equity flows," Review of Financial Economics, Elsevier, vol. 18(4), pages 202-209, October.
    3. Giancarlo Corsetti & John Flemming & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2002. "The Weakness of the Euro: Is it Really a Mystery?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 2002(CESIFOFOR), pages 27-42, 04.
    4. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 198, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    5. Constantinos Alexiou & Joseph G. Nellis, 2013. "Challenging the Raison d’etre of Internal Devaluation in the Context of the Greek Economy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 813-836, December.
    6. Rebecca L Driver & Peter F Westaway, 2005. "Concepts of equilibrium exchange rates," Bank of England working papers 248, Bank of England.
    7. Paul Welfens, 2010. "Transatlantic banking crisis: analysis, rating, policy issues," International Economics and Economic Policy, Springer, vol. 7(1), pages 3-48, May.

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