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Australia and New Zealand Exchange Rates

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Author Info

  • Hali J. Edison
  • Francis Vitek

Abstract

The paper describes three empirical models commonly used to conduct exchange rate assessments and applies them to data for Australia and New Zealand. The baseline results using data and mediumterm projections available as of October 2008, suggest that the Australian and New Zealand dollars were broadly in line with fundamentals, but with a wide variation across models. A battery of sensitivity tests illustrate that altering the underlying assumptions can yield substantially different assessments. The results are particularly sensitive to the choice of assessment horizon, the set of economies included in the sample, medium-term forecasts, and the exchange rate reference period.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/7.

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Length: 33
Date of creation: 01 Jan 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/7

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Related research

Keywords: Exchange rate assessments; Real effective exchange rates; Fiscal sustainability; Forecasting models; exchange rate; current account; current account balance; effective exchange rate; real effective exchange rate; real exchange rate; exchange rates; current account deficits; exchange rate developments; domestic currency; nominal effective exchange rate; exchange rate data; current account deficit; exchange rate overvaluation; exchange rate adjustment; reserve bank; exchange rate pass; bilateral exchange rates; equilibrium exchange rate; current account balances; net debtor; central bank; budget balance; foreign debt; floating exchange rates; exchange rate misalignment; currency composition; effective exchange rates; exchange rate movements; real exchange rates; debtor countries; nominal bilateral exchange rates; exchange rate changes; balance of payments;

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References

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  1. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments," IMF Occasional Papers 261, International Monetary Fund.
  2. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  3. Anne-Marie Brook & David Hargreaves, 2000. "A macroeconomic balance measure of New Zealand's equilibrium exchange rate," Reserve Bank of New Zealand Discussion Paper Series DP2000/09, Reserve Bank of New Zealand.
  4. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  5. Maurice Obstfeld and Kenneth Rogoff., 1994. "The Intertemporal Approach to the Current Account," Center for International and Development Economics Research (CIDER) Working Papers C94-044, University of California at Berkeley.
  6. Ken Froot & Kenneth Rogoff, . "Perspectives on PPP and Long-Run Real Exchange Rates," Working Paper 32027, Harvard University OpenScholar.
  7. Nikola Dvornak & Marion Kohler & Gordon Menzies, 2003. "Australia’s Medium-run Exchange Rate: A Macroeconomic Balance Approach," RBA Research Discussion Papers rdp2003-03, Reserve Bank of Australia.
  8. Peter Isard, 2007. "Equilibrium Exchange Rates," IMF Working Papers 07/296, International Monetary Fund.
  9. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
  10. Lamin Leigh & Steven Vincent Dunaway & Xiangming Li, 2006. "How Robust Are Estimates of Equilibrium Real Exchange Rates," IMF Working Papers 06/220, International Monetary Fund.
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Cited by:
  1. James Graham & Daan Steenkamp, 2012. "Extending the Reserve Bank’s macroeconomic balance model of the exchange rate," Reserve Bank of New Zealand Analytical Notes series AN2012/08, Reserve Bank of New Zealand.
  2. 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.

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