Exchange rate modelling for Lithuania and Switzerland
AbstractIn this research, the equilibrium real exchange rate as well as exchange rate misalignment in Switzerland and Lithuania is estimated based on behavioural equilibrium exchange rate and structural vector autoregression models. Moreover, driving forces of the real effective exchange rate are identified based on these methods for both countries. For estimation purposes data from various sources, such as Reuters, Eurostat, Swiss National Bank, Bank of Lithuania, Datastream, World Bank, IMF and others, is used. The results indicate that openness differential, net foreign assets, commodity terms of trade, productivity differential and fiscal balance to gross domestic product differential are significant determinants of the real effective exchange rate in Switzerland, and the latter three variables are significant in determining the real effective exchange rate in Lithuania. Results also give evidence that real effective exchange rate is mainly driven by demand shocks in both countries. Several periods of significant misalignment are detected for both Switzerland and Lithuania. The Thesis supports the exchange rate policy implemented by the Swiss National Bank and the internal adjustment strategy pursued by the Lithuanian government.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43451.
Date of creation: 03 Sep 2012
Date of revision:
equilibrium exchange rate; BEER; SVAR; REER; Lithuania; Switzerland;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-12 (All new papers)
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