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The Swedish Real Exchange Rate under Different Currency Regimes

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  • Larsson, Anna

    ()
    (Department of Economics, Stockholm University and)

Abstract

This paper presents evidence on the behavior of the Swedish real exchange rate relative to Germany under different currency regimes 1973:1-2001:4. The results suggest that the real exchange rate is cointegrated with Swedish and German productivity, which is consistent with Balassa (1964) and Samuelson (1964). In the short run, the regime has mattered for the dynamics of the real exchange rate. Deviations from equilibrium have been adjusted more quickly when the nominal exchange rate has been allowed to float freely, which indicates that it acts as a shock absorber.

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Bibliographic Info

Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 180.

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Length: 29 pages
Date of creation: 11 Nov 2002
Date of revision: 18 Sep 2003
Publication status: Published in Review of World Economics, 2004, pages 706-727.
Handle: RePEc:hhs:fiefwp:0180

Note: This paper is a considerably revised version of my master thesis written at Stockholm University.
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Keywords: Real exchange rate; Exchange rate regimes; Cointegration;

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References

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  1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  2. Artis, Michael & Ehrmann, Michael, 2006. "The exchange rate - A shock-absorber or source of shocks? A study of four open economies," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 874-893, October.
  3. Annika Alexius & Jonny Nilsson, 2000. "Real Exchange Rates and Fundamentals: Evidence from 15 OECD Countries," Open Economies Review, Springer, vol. 11(4), pages 383-397, October.
  4. Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," NBER Working Papers 4807, National Bureau of Economic Research, Inc.
  5. Ken Froot & Kenneth Rogoff, . "Perspectives on PPP and Long-Run Real Exchange Rates," Working Paper 32027, Harvard University OpenScholar.
  6. Alexius, Annika, 1996. "Long Run Real Exchange Rates - A Cointegration Analysis," Working Paper Series in Economics and Finance 119, Stockholm School of Economics.
  7. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
  8. Alexius, Annika, 1999. "Sources of Real Exchange Rate Fluctuations in the Nordic Countries," Working Paper Series 90, Sveriges Riksbank (Central Bank of Sweden).
  9. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  10. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
  11. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  12. Alan M. Taylor, 2002. "A Century Of Purchasing-Power Parity," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 139-150, February.
  13. Menzie David Chinn, 1997. "Sectoral Productivity, Government Spending and Real Exchange Rates: Empirical Evidence for OECD Countries," NBER Working Papers 6017, National Bureau of Economic Research, Inc.
  14. Enders, Walter, 1988. "ARIMA and Cointegration Tests of PPP under Fixed and Flexible Exchange Rate Regimes," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 504-08, August.
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Cited by:
  1. Lundborg, Per, 2005. "Wage Theories for the Swedish Labour Market," Working Paper Series 207, Trade Union Institute for Economic Research.
  2. Lundborg, Per, 2005. "Wage Fairness, Growth and the Utilization of R&D Workers," Working Paper Series 206, Trade Union Institute for Economic Research.
  3. Selén, Jan & Ståhlberg, Ann-Charlotte, 2004. "Wage and Compensation Inequality — How Different?," Working Paper Series 197, Trade Union Institute for Economic Research.

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