Fundamental equilibrium exchange rates and exchange rate dynamics
This paper examines whether there is a tendency for actual exchange rates to return to their fundamental equilibrium exchange rates (FEERs) when the latter are estimated based on popular exchange rate models. Co-integration tests and unit root tests are applied. There is little evidence that the exchange rates of Japan and Germany have a reversion to the purchasing-power-parity (PPP) rates or Williamson's FEERs or the underlying external and internal balance (UEI) FEERs. Copyright Kluwer Academic Publishers 1993
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.:
- Huizinga, John, 1987. "An empirical investigation of the long-run behavior of real exchange rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 149-214, January.
- Corbae, Dean & Ouliaris, Sam, 1988. "Cointegration and Tests of Purchasing Power Parity," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 508-11, August.
- Adler, Michael & Lehmann, Bruce, 1983. " Deviations from Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 38(5), pages 1471-87, December.
- Perron, Pierre, 1988.
"Trends and random walks in macroeconomic time series : Further evidence from a new approach,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 12(2-3), pages 297-332.
- Perron, P., 1986. "Trends and Random Walks in Macroeconomic Time Series: Further Evidence From a New Approach," Cahiers de recherche 8650, Universite de Montreal, Departement de sciences economiques.
- Kim, Yoonbai, 1990. "Purchasing Power Parity in the Long Run: A Cointegration Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(4), pages 491-503, November.
- McKinnon, Ronald I, 1988. "Monetary and Exchange Rate Policies for International Financial Stability: A Proposal," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 83-103, Winter.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Barrell, Ray & Wren-Lewis, Simon, 1989. "Fundamental Equilibrium Exchange Rates for the G7," CEPR Discussion Papers 323, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:4:y:1993:i:2:p:189-209. 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: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.