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Equilibrium Exchange Rates: Assessment Methodologies

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  • Peter Isard
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    Abstract

    The paper describes six different methodologies that have been used to assess the equilibrium values of exchange rates and discusses their limitations. It applies several of the approaches to data for the United States as of 2006, illustrates that different approaches sometimes provide substantially different assessments, and asks which methodologies deserve the most weight in such situations. It argues that while it is generally desirable to consider the implications of several different approaches, since different approaches provide different types of perspectives, two of the methodologies seem particularly relevant for identifying threats to macroeconomic stability and growth.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/296.

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    Length: 74
    Date of creation: 01 Dec 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/296

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    Related research

    Keywords: Exchange rate assessments; Purchasing power parity; Consumer goods; Economic models;

    This paper has been announced in the following NEP Reports:

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    Citations

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    Cited by:
    1. Zhibai, Zhang, 2012. "RMB Undervaluation and Appreciation," MPRA Paper 40978, University Library of Munich, Germany.
    2. 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.
    3. Juan Zalduendo, 2008. "Bivariate Assessments of Real Exchange Rates Using PPP Data," IMF Working Papers 08/153, International Monetary Fund.
    4. Klaus Regling & Servaas Deroose & Reinhard Felke & Paul Kutos, 2010. "The Euro After Its First Decade : Weathering the Financial Storm and Enlarging the Euro Area," Governance Working Papers 22817, East Asian Bureau of Economic Research.
    5. Hali J. Edison & Francis Vitek, 2009. "Australia and New Zealand Exchange Rates: A Quantitative Assessment," IMF Working Papers 09/7, International Monetary Fund.
    6. Jair Ojeda JOya & Jhon Edwar Torres, 2012. "Posición Externa de Largo Plazo y Tipo de Cambio Real de Equilibrio en Colombia," Borradores de Economia 745, Banco de la Republica de Colombia.
    7. Emilio Pineda & Paul Cashin & Yan Sun, 2009. "Assessing Exchange Rate Competitiveness in the Eastern Caribbean Currency Union," IMF Working Papers 09/78, International Monetary Fund.
    8. Olaf Unteroberdoerster & Runchana Pongsaparn, 2011. "Financial Integration and Rebalancing in Asia," IMF Working Papers 11/243, International Monetary Fund.
    9. Hubert Gabrisch & Karsten Staehr, 2012. "The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries," Working Papers 324, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
    10. Dupuy, Philippe & Carlotti, Jean-Etienne, 2010. "The Optimal Path of the Chinese Renminbi," MPRA Paper 26107, University Library of Munich, Germany.
    11. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2008. "Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies," Working Papers 2008-32, CEPII research center.
    12. Zhang, Zhibai, 2012. "A simple model and its application in currency valuation," MPRA Paper 40650, University Library of Munich, Germany.
    13. Eichler, Stefan, 2011. "Exchange rate expectations and the pricing of Chinese cross-listed stocks," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 443-455, February.
    14. Hanan Morsy, 2009. "Current Account Determinants for Oil-Exporting Countries," IMF Working Papers 09/28, International Monetary Fund.
    15. Zhibai, Zhang, 2012. "A Simple Model and Its Application in the Valuation of Five Asian Real Exchange Rates," MPRA Paper 40953, University Library of Munich, Germany.
    16. Yougbaré, Lassana, 2011. "Exchange rate arrangements and misalignments: contrasting words and deeds," MPRA Paper 32362, University Library of Munich, Germany.

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