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427 - Comparing alternative methodologies for real exchange rate assessment - Matteo Salto and Aless

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  • Matteo Salto
  • Alessandro Turrini

Abstract

Summary for non-specialistsThis paper compares alternative methodologies for estimating real exchange rate misalignment for EU countries. It is shown that current account-based approaches (based on NFA stabilisation and current account norms) and relative-price based approaches (BEER and PPP-based) deliver broadly consistent assessments, however sometimes differences are non-negligible. Current account-based misalignment appears to be driven to a larger extent by shocks affecting domestic absorption and national savings and quite often becomes manifest before price-based misalignment. All misalignment measures, and especially the BEER, are related with medium-term developments in real exchange rates, while only current-account based misalignment is a significant predictor of forthcoming current account developments.

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File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp427_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 427.

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Length: 56 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:euf:ecopap:0427

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Related research

Keywords: Real Effective Exchange Rate REER misalignment BEER competitiveness current account norms current account Turrini Salto exchange rate assessment Comparing alternative methodologies;

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  1. Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2008. "How Robust are Estimated Equilibrium Exchange Rates? A Panel BEER Approach," Working Papers 2008-01, CEPII research center.
  2. Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2010. "On the Complementarity of Equilibrium Exchange-Rate Approaches," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 618-632, 09.
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