Do Fundamentals Explain the Behavior of the Real Effective Exchange Rate?
In this study, we make use of time series analysis to calculate a real effective equilibrium exchange rate for Sweden. The results indicate that the krona was severely overvalued in late 1992, when the fixed exchange rate regime finally was abandoned. Furthermore, the results indicate that the real effective equilibrium exchange rate has depreciated substantially since the mid-1990s, primarily due to deteriorating terms of trade. The results indicate that the krona was undervalued by some 4 to 5 percent at the end of 2000, given the prevailing economic conditions. We also provide some arithmetical examples of SEK/EUR conversion rates, under various assumptions, to provide some guideline if Sweden is to adopt the common currency in the near future.
|Date of creation:||01 Mar 2002|
|Contact details of provider:|| Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden|
Phone: 46-(0)8-453 59 00
Fax: 46-(0)8-453 59 80
Web page: http://www.konj.se/
More information through EDIRC
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.:
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- Jonathan D. Ostry, 1988. "The Balance of Trade, Terms of Trade, and Real Exchange Rate: An Intertemporal Optimizing Framework," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 541-573, December.
- Froot, Kenneth A. & Rogoff, Kenneth, 1995.
"Perspectives on PPP and long-run real exchange rates,"
Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688
- Ken Froot & Kenneth Rogoff, "undated". "Perspectives on PPP and Long-Run Real Exchange Rates," Working Paper 32027, Harvard University OpenScholar.
- Kenneth A. Froot & Kenneth Rogoff, 1994. "Perspectives on PPP and Long-Run Real Exchange Rates," NBER Working Papers 4952, National Bureau of Economic Research, Inc.
- Clark, Peter B. & MacDonald, Ronald, 2004.
"Filtering the BEER: A permanent and transitory decomposition,"
Global Finance Journal,
Elsevier, vol. 15(1), pages 29-56.
- Peter B. Clark & Ronald MacDonald, 2000. "Filtering the Beer; A Permanent and Transitory Decomposition," IMF Working Papers 00/144, International Monetary Fund.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Vincent Koen & Laurence Boone & Alain de Serres & Nicola Fuchs, 2001. "Tracking the Euro," OECD Economics Department Working Papers 298, OECD Publishing.
- Hamid Faruqee, 1995.
"Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective,"
IMF Staff Papers,
Palgrave Macmillan, vol. 42(1), pages 80-107, March.
- Hamid Faruqee, 1994. "Long-Run Determinants of the Real Exchange Rate; A Stock-Flow Perspective," IMF Working Papers 94/90, International Monetary Fund.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Susana Garcia Cervero & J. Humberto Lopez & Enrique Alberola Ila & Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates; Euro, Dollar, “Ins,” “Outs,” and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 99/175, International Monetary Fund.
- 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.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
- Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, International Monetary Fund.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
- Ronald MacDonald & Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals; A Methodological Comparison of BEERs and FEERs," IMF Working Papers 98/67, International Monetary Fund. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hhs:nierwp:0078. 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: (Sarah Hegardt Grant)
If references are entirely missing, you can add them using this form.