Australia’s Medium-run Exchange Rate: A Macroeconomic Balance Approach
AbstractWe analyse the determinants of Australia’s exchange rate in terms of the approach introduced by Williamson (1983), based on the simultaneous attainment of internal and external balance. Internal balance implies that the economy is operating at its supply potential with no inflationary pressures. External balance is characterised as the sustainable net flow of resources (corresponding to a current account to GDP ratio) between countries when they are in internal balance. The approach provides estimates of the medium-term exchange rate associated with a given current account position, although the estimates are highly sensitive to variations in key parameters.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2003-03.
Date of creation: Mar 2003
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Other versions of this item:
- 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.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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