A new approach to estimating equilibrium exchange rates for small open economies: The case of Canada
This paper proposes a new approach to estimating equilibrium exchange rates for small open economies. We set up a simple structural model of output, the rate of in ation and the real exchange rate. These observed variables are explained by unobserved equilibrium rates as well as unobserved transitory components in output and the exchange rate. Using Canadian data over 1974-2008 we jointly estimate the unobserved components and the structural pa- rameters using the Kalman lter and Bayesian technique. We nd that Canada's equilibrium exchange rate evolves smoothly and follows a trend depreciation. The transitory component is found to be very persistent but much more volatile than the equilibrium rate.
|Date of creation:||Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www1.wiwi.uni-muenster.de/cqe/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cqe:wpaper:0509. 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: (Susanne Deckwitz)
If references are entirely missing, you can add them using this form.