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Alternative Measures of the Swedish Real Effective Exchange Rate

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  • Nilsson, Kristian

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    (National Institute of Economic Research)

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    Abstract

    This study presents alternative measures of the Swedish real effective exchange rate (REER), based on three alternative weighting schemes and three alternative price indices. Pros and cons of alternative measures are discussed in the context of the REER as an indicator of competitiveness. Bivariate VAR-models are estimated in an effort to conclude whether or not the alternative REER measures contain leading information on real GDP, real investments and real net exports. The results may be interpreted as empirical support for the supposition that REERs based on export prices reflect competitiveness primarily for internationally trade goods and services, while REERs based on consumer prices serve as a broader indicator of competitiveness.

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    File URL: http://www.konj.se/download/18.70c52033121865b1398800093046/WP_68.pdf
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    Bibliographic Info

    Paper provided by National Institute of Economic Research in its series Working Paper with number 68.

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    Length: 38 pages
    Date of creation: 01 Dec 1999
    Date of revision:
    Handle: RePEc:hhs:nierwp:0068

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    1. Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, International Monetary Fund.
    2. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
    3. Arnold Harberger, 1986. "Economic Adjustment and the Real Exchange Rate," NBER Chapters, in: Economic Adjustment and Exchange Rates in Developing Countries, pages 369-424 National Bureau of Economic Research, Inc.
    4. Lafrance, Robert & Osakwe, Patrick & St-Amant, Pierre, 1998. "Evaluating Alternative Measures of the Real Effective Exchange Rate," Working Papers 98-20, Bank of Canada.
    5. Geweke, John, 1984. "Inference and causality in economic time series models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 19, pages 1101-1144 Elsevier.
    6. Ken Froot & Kenneth Rogoff, . "Perspectives on PPP and Long-Run Real Exchange Rates," Working Paper 32027, Harvard University OpenScholar.
    7. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
    8. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
    9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    10. Jonathan D. Ostry, 1988. "The Balance of Trade, Terms of Trade, and Real Exchange Rate: An Intertemporal Optimizing Framework," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 541-573, December.
    11. Steven A. Symansky & Peter B. Clark & Leonardo Bartolini & Tamim Bayoumi, 1994. "Exchange Rates and Economic Fundamentals," IMF Occasional Papers 115, International Monetary Fund.
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    Cited by:
    1. Pelinescu, Elena & Caraiani, Petre, 2006. "Estimating the Real Effective Exchange Rate (REER) by Using the Unit Labor Cost (ULC) in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 3(4), pages 5-22, December.
    2. Bergvall, Anders, 2002. "The Stabilizing Properties of Floating Exchange Rates: Some International Evidence," Working Paper Series 2002:14, Uppsala University, Department of Economics.
    3. Marit Hinnosaar & Hannes Kaadu & Lenno Uusküla, 2005. "Estimating the equilibrium exchange rate of the Estonian kroon," Bank of Estonia Working Papers 2005-2, Bank of Estonia, revised 10 Oct 2005.
    4. Li, Ying & Rowe, Francis, 2007. "Aid inflows and the real effective exchange rate in Tanzania," Policy Research Working Paper Series 4456, The World Bank.

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