A model of Equilibrium Exchange Rates for the New Zealand and Australian dollar
AbstractThis paper extends the `Five Area Bilateral Equilibrium Exchange Rate' (FABEER) model used in Wren-Lewis (2003) to include New Zealand and Australia. This model calculates medium term exchange rates conditional on assumptions for `sustainable' current accounts. The model suggests that the equilibrium value of both currencies has been declining over the last ten years and that both currencies were near fair value (on average) during 2002. Equilibrium values against the US dollar are estimated to be around 0.50 (New Zealand) and 0.59 (Australia), although these estimates are sensitive to the assumed equilibrium values for variables like commodity prices and the current account.
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 DP 2004/07.
Length: 33 p.
Date of creation: Aug 2004
Date of revision:
Find related papers by JEL classification:
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-03-13 (All new papers)
- NEP-CBA-2005-03-13 (Central Banking)
- NEP-IFN-2005-03-13 (International Finance)
- NEP-MAC-2005-03-13 (Macroeconomics)
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.:
- 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.
- Anne-Marie Brook & David Hargreaves, 2001. "PPP-based analysis of New Zealand's equilibrium exchange rate," Reserve Bank of New Zealand Discussion Paper Series DP2001/01, Reserve Bank of New Zealand.
- Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
- Nikola Dvornak & Marion Kohler & Gordon Menzies, 2005.
"Australia's Medium-Run Exchange Rate: A Macroeconomic Balance Approach,"
The Economic Record,
The Economic Society of Australia, vol. 81(253), pages 101-112, 06.
- 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.
- Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
- Rebecca L Driver & Peter F Westaway, 2005. "Concepts of equilibrium exchange rates," Bank of England working papers 248, Bank of England.
- Anella Munro, 2005. "UIP, Expectations and the Kiwi," Reserve Bank of New Zealand Discussion Paper Series DP2005/05, Reserve Bank of New Zealand.
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.