Modelling the long-run real effective exchange rate of the New Zealand Dollar
AbstractThe usefulness of the concept of an equilibrium exchange rate has been brought into sharp focus by the dramatic depreciation of the euro since its inception in 1999. Does this movement reflect a movement of the actual exchange rate relative to its equilibrium or has the equilibrium shifted relative to the perception of where the euro was in 1999? Similar kinds of questions have been asked about the behaviour of the New Zealand dollar since the latter part of 1999. To answer these kinds of questions it is necessary to have some measure of an equilibrium exchange rate and there are a plethora of alternative approaches available in the literature. In this paper we use the behavioural equilibrium exchange rate (BEER) approach of Clark and MacDonald (1999) to produce long-run equilibrium exchange rates for the effective real exchange rates of the New Zealand dollar. We demonstrate that a well founded measure of the equilibrium value of the dollar may be recovered from a relatively small set of fundamental variables and that this can be used to produce an assessment of the dollar in terms of periods of misalignment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2002/02.
Date of creation: Oct 2001
Date of revision:
Other versions of this item:
- Ronald MacDonald, 2002. "Modelling the Long-run Real Effective Exchange Rate of the New Zealand Dollar," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 519-537, December.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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.:
- Clark, Peter B. & MacDonald, Ronald, 2004.
"Filtering the BEER: A permanent and transitory decomposition,"
Global Finance Journal,
Elsevier, vol. 15(1), pages 29-56.
- Peter B. Clark & Ronald MacDonald, 2000. "Filtering the BEER - A Permanent and Transitory Decomposition," IMF Working Papers 00/144, International Monetary Fund.
- Campbell, John Y. & Clarida, Richard H., 1987.
"The dollar and real interest rates,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 27(1), pages 103-139, January.
- Campbell, John & Clarida, Richard, 1987. "The Dollar and Real Interest Rates," Scholarly Articles 3221495, Harvard University Department of Economics.
- John Y. Campbell & Richard H. Clarida, 1988. "The Dollar and Real Interest Rates," NBER Working Papers 2151, National Bureau of Economic Research, Inc.
- Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000.
"Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework,"
Econometric Society World Congress 2000 Contributed Papers
0051, Econometric Society.
- Susana Garcia Cervero & J. Humberto Lopez & Enrique Alberola Ila & Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates - Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 99/175, International Monetary Fund.
- Ronald MacDonald & Jun Nagayasu, 2000.
"The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study,"
IMF Staff Papers,
Palgrave Macmillan, vol. 47(1), pages 5.
- Jun Nagayasu & Ronald MacDonald, 1999. "The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials - A Panel Study," IMF Working Papers 99/37, International Monetary Fund.
- Ronald MacDonald & Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals - A Methodological Comparison of BEERs and FEERs," IMF Working Papers 98/67, International Monetary Fund.
- Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of It," IMF Working Papers 97/21, International Monetary Fund.
- Ramkishen S. Rajan & Reza Y. Siregar, 2007.
"Models of Equilibrium Real Exchange Rates Revisited: A Selective Review of the Literature,"
- Reza Siregar & Ramkishen Rajan, 2006. "Models of Equilibrium Real Exchange Rates Revisited: A Selective Review of the Literature," Centre for International Economic Studies Working Papers 2006-04, University of Adelaide, Centre for International Economic Studies.
- Angela Huang, 2004. "Examining finite-sample problems in the application of cointegration tests for long-run bilateral exchange rates," Reserve Bank of New Zealand Discussion Paper Series DP 2004/08, Reserve Bank of New Zealand.
- Dominick Stephens, 2004. "The equilibrium exchange rate according to PPP and UIP," Reserve Bank of New Zealand Discussion Paper Series DP 2004/03, Reserve Bank of New Zealand.
- Nikolaos Giannellis & Athanasios Papadopoulos, 2007.
"Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members,"
Open Economies Review,
Springer, vol. 18(3), pages 307-326, July.
- Nikolaos Giannellis & Athanasios Papadopoulos, 2005. "Estimating the Equilibrium Effective Exchange Rate for Potential EMU members," Working Papers 0719, University of Crete, Department of Economics, revised 08 Mar 2007.
- Reza Siregar, 2011.
"The Concepts of Equilibrium Exchange Rate: A Survey of Literature,"
South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81, June.
- Siregar, Reza, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," MPRA Paper 28987, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre).
If references are entirely missing, you can add them using this form.