IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/93-48.html
   My bibliography  Save this paper

Deer Hunting; Misalignment, Debt Accumulation, and Desired Equilibrium Exchange Rates

Author

Listed:
  • Mark P. Taylor
  • Michael J. Artis

Abstract

This paper deals with hysteresis in the desired equilibrium exchange rate (DEER) arising from misalignment. When the actual real exchange rate departs from its DEER value, current account realizations--and consequently, debt service obligations--will differ from those assumed in the initial DEER calculation, necessitating its recomputation. The paper derives a formal expression for this hysteresis effect in the DEER, studies the convergence properties of a system in which the evolution of actual exchange rates depends on the DEER and provides illustrative calculations of its historical significance. Finally, the paper derives and applies rules of thumb for computing the hysteresis effect when considering the rate of approach of an exchange rate to its DEER value.

Suggested Citation

  • Mark P. Taylor & Michael J. Artis, 1993. "Deer Hunting; Misalignment, Debt Accumulation, and Desired Equilibrium Exchange Rates," IMF Working Papers 93/48, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:93/48
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=865
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antoine Bouveret & Bruno Ducoudre, 2007. "On the Contingency of Equilibrium Exchange Rates with Time - Consistent Economic Policies," Sciences Po publications 2007-08, Sciences Po.
    2. repec:spo:wpecon:info:hdl:2441/6125 is not listed on IDEAS
    3. Kateřina Šmídková & Aleš Bulíř, 2004. "Would Fast Sailing towards the Euro Be Smooth? What Fundamental Real Exchange Rates Tells Us about Acceding Economies," Working Papers IES 64, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
    4. Kateřina Šmídková & Ray Barrell & Dawn Holland, 2003. "Estimates of fundamental real exchange rates for the five eu pre-accession countries," Prague Economic Papers, University of Economics, Prague, vol. 2003(4).
    5. Hervé Joly & Céline Prigent & Nicolas Sobczak, 1996. "Le taux de change réel d'équilibre : une introduction," Économie et Prévision, Programme National Persée, vol. 123(2), pages 1-21.
    6. Kateřina Šmídková & Aleš Bulíř, 2005. "Would Fast Sailing Towards the Euro Be Smooth? What Fundamental Real Exchange Rates Tell Us," Prague Economic Papers, University of Economics, Prague, vol. 2005(4), pages 291-316.
    7. Carmen Mar? Mart?ez, 2003. "Current Account Imbalances, Thriftiness And The Real Exchange Rate In A Growing Economy," UFAE and IAE Working Papers 589.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    8. Bruno Ducoudre, 2008. "Structure par terme des taux d’intérêt et anticipations de la politique économique," Sciences Po publications info:hdl:2441/5221, Sciences Po.
    9. Claude Aline Zobo, 2014. "European Crisis and Sustainability of the CFA Franc Fixity to Euro," The Journal of European Theoretical and Applied Studies, The Center for European Studies at Kirklareli University - Turkey, vol. 2(2), pages 53-71.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:93/48. 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: (Jim Beardow) or (Hassan Zaidi). General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.