IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Estimation of consistent multi-country FEERs

  • Carton, Benjamin
  • Hervé, Karine

Most studies on equilibrium exchange rates focus on a limited number of G7 countries. But in a situation of world imbalances, emerging countries can no longer be excluded. The study of all equilibrium exchange rates is delicate. First, the trade model has to be balanced at the aggregate level. This paper suggests a method to achieve world balance both in volume and in value. Second, the N−1 bilateral exchange rates cannot ensure that the N areas will reach their macroeconomic equilibrium simultaneously. This paper examines the existing solutions to solve the N−1 problem and proposes an alternative which minimizes the distance to the current-account targets. Finally, in order to compare the relevance of the different methodologies, FEERs are calculated for 19 industrialized and developing countries. The results, which are taking into account the modification on output gap assessment induced by the 2008–2009 crisis, lead for the year 2010 to a USD closed to its equilibrium, a RMB undervalued by around 35% in real effective terms and to a EUR/USD parity equals to 1.47.

If 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.

File URL: http://www.sciencedirect.com/science/article/pii/S0264999312000879
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1205-1214

as
in new window

Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1205-1214
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

References listed on IDEAS
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.:

as in new window
  1. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "International Financial Adjustment," Center for International and Development Economics Research, Working Paper Series qt124628cx, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  2. Keiko Murata & Dave Turner & David Rae & Laurence Le Fouler, 2000. "Modelling Manufacturing Export Volumes Equations: A System Estimation Approach," OECD Economics Department Working Papers 235, OECD Publishing.
  3. Nicolas Sobczak & Céline Prigent & Hervé Joly, 1996. "Le taux de change réel d'équilibre : une introduction," Économie et Prévision, Programme National Persée, vol. 123(2), pages 1-21.
  4. 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.
  5. William R. Cline & John Williamson, 2009. "2009 Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB09-10, Peterson Institute for International Economics.
  6. Didier Borowski & Cécile Couharde & Florence Thibault, 1998. "Les taux de change d'équilibre fondamentaux : de l'approche théorique à l'évaluation empirique," Revue Française d'Économie, Programme National Persée, vol. 13(3), pages 177-206.
  7. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment; Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
  8. repec:sae:niesru:v:137:y::i:1:p:45-50 is not listed on IDEAS
  9. Simon Wren-Lewis & Rebecca Driver, 1998. "Real Exchange Rates for the Year 2000," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa54.
  10. Peter Hooper & Karen Johnson & Jaime Marquez, 1998. "Trade elasticities for G-7 countries," International Finance Discussion Papers 609, Board of Governors of the Federal Reserve System (U.S.).
  11. Tamim Bayoumi, 1999. "Estimating Trade Equations From Aggregate Bilateral Data," IMF Working Papers 99/74, International Monetary Fund.
  12. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  13. Barrell, Ray & Wren-Lewis, Simon, 1989. "Fundamental Equilibrium Exchange Rates for the G7," CEPR Discussion Papers 323, C.E.P.R. Discussion Papers.
  14. Cécile Couharde & Didier Borowski, 2000. "Euro, dollar, yen. Pour une approche multilatérale des taux de change d'équilibre," Revue Économique, Programme National Persée, vol. 51(3), pages 671-681.
  15. Se-Eun Jeong & Jacques Mazier, 2003. "Exchange Rate Regimes and Equilibrium Exchange Rates in East Asia," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 1161-1182.
  16. repec:cai:recosp:reco_p2000_51n3_0671 is not listed on IDEAS
  17. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
  18. Bénassy-Quéré, Agnès & Lahrèche-Révil, Amina & Mignon, Valérie, 2011. "World-consistent equilibrium exchange rates," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 12-32, June.
  19. Maurice Obstfeld & Kenneth Rogoff, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 169-208.
  20. Didier Borowski & Cecile Couharde, 1999. "Quelle parite d'equilibre pour l'euro ?," Economie Internationale, CEPII research center, issue 77, pages 21-44.
  21. Herve Joly & Celine Prigent & Alain Quinet & Nicolas Sobczak, 1999. "Une estimation du taux de change reel d'equilibre pour l'economie francaise," Economie Internationale, CEPII research center, issue 77, pages 3-20.
  22. Benjamin Carton & Karine Herve & Nadia Terfous, 2006. "Interventions de change en Asie et taux de change d’équilibre du dollar," Economie Internationale, CEPII research center, issue 106, pages 57-84.
  23. William R. Cline, 2008. "Estimating Consistent Fundamental Equilibrium Exchange Rates," Working Paper Series WP08-6, Peterson Institute for International Economics.
  24. repec:cai:recosp:reco_545_0001 is not listed on IDEAS
  25. Marquez, Jaime, 1990. "Bilateral Trade Elasticities," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 70-77, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1205-1214. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.