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A Fair Exchange? Theory and Practice of Calculating Equilibrium Exchange Rates Author info | Abstract | Publisher info | Download info | Related research | Statistics Tamim Bayoumi
Hamid Faruqee
Jaewoo Lee
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We develop a theory-based model of equilibrium exchange rates incorporating factors that have been found to matter empirically. The model provides insights into how variables should be measured and what are appropriate cross-country restrictions. We estimate this model using a panel of 12 industrial countries. The model fits the data relatively well, implying relatively fast adjustment to equilibrium and outperforming a random walk at longer horizons. Furthermore, we find that the rate of adjustment depends on the distance from equilibrium, suggesting that part of the explanation for slow adjustment is inaccurate measures of equilibrium.
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Paper provided by International Monetary Fund in its series IMF Working Papers with number
05/229.
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Length: 28 pages
Date of creation: 21 Dec 2005Date of revision:
Handle: RePEc:imf:imfwpa:05/229Contact details of provider: Postal: International Monetary Fund, Washington, DC USA Phone: (202) 623-7000 Fax: (202) 623-4661 Email: Web page: http://www.imf.org/external/pubind.htm More information through EDIRC
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Keywords: Exchange rates ; Economic models ; Other versions of this item:
This paper has been announced in the following NEP Reports :
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Mohsin S. Khan & Ehsan U. Choudhri, 2004.
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Tamim Bayoumi & Martin M�hleisen, 2006.
"Energy, the Exchange Rate, and the Economy: Macroeconomic Benefits of Canada's Oil Sands Production ,"
IMF Working Papers
06/70, International Monetary Fund.
[Downloadable!]
THORBECKE, Willem, 2008.
"The Effect of Exchange Rate Volatility on Fragmentation in East Asia: Evidence from the Electronics Industry ,"
Discussion papers
08016, Research Institute of Economy, Trade and Industry (RIETI).
[Downloadable!]
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