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Estimates of Fundamental Equilibrium Exchange Rates, November 2013

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  • William R. Cline

    () (Peterson Institute for International Economics)

Abstract

Since the previous estimates of fundamental equilibrium exchange rates (FEERs) in May 2013, numerous exchange rates have moved substantially in response to the US Federal Reserve's announcement that it would likely begin to "taper" its quantitative easing. Despite widespread concern that this "taper shock" has wreaked havoc in international capital and currency markets, exchange rate misalignments have tended to narrow in the past six months. Overvalued currencies have corrected downward in Turkey, South Africa, India, Indonesia, and even Australia. Medium-term surplus estimates have moderated in Taiwan, Sweden, Switzerland, and Japan, narrowing the extent of their undervaluations. Cases of large misalignments persist, however, with Singapore once again undervalued by 21 percent, New Zealand again overvalued by nearly 18 percent, and Turkey still overvalued by 18 percent despite some correction. The overvaluation of the dollar and undervaluation of the Chinese renminbi remain modest and no longer constitute the severe imbalances of 2006–07.

Suggested Citation

  • William R. Cline, 2013. "Estimates of Fundamental Equilibrium Exchange Rates, November 2013," Policy Briefs PB13-29, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb13-29
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    File URL: https://piie.com/publications/policy-briefs/estimates-fundamental-equilibrium-exchange-rates-november-2013
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    References listed on IDEAS

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    1. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
    2. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
    3. Anders Aslund, 2010. "The Last Shall Be the First: The East European Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5218.
    4. Rose, Andrew K., 2014. "Surprising similarities: Recent monetary regimes of small economies," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 5-27.
    5. Klein, Michael W. & Shambaugh, Jay C., 2012. "Exchange Rate Regimes in the Modern Era," MIT Press Books, The MIT Press, edition 1, volume 1, number 026251799x, January.
    6. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
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    Cited by:

    1. MASUJIMA Yuki, 2015. "Assessing Asian Equilibrium Exchange Rates as Policy Instruments," Discussion papers 15038, Research Institute of Economy, Trade and Industry (RIETI).
    2. Joseph E. Gagnon, 2014. "Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do," Policy Briefs PB14-17, Peterson Institute for International Economics.
    3. Luo, Ji & Williams, Gary W., 2015. "The Impacts of Chinese Exchange Rate Policy on World Soybean and Products Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205075, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    4. repec:wsi:ceprxx:v:03:y:2014:i:02:n:s1793969014500095 is not listed on IDEAS
    5. Jose De Gregorio, 2015. "From Rapid Recovery to Slowdown: Why Recent Economic Growth in Latin America Has Been Slow," Policy Briefs PB15-6, Peterson Institute for International Economics.

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