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A Two-Country NATREX Model for the Euro/Dollar

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  • Belloc, Marianna
  • Federici, Daniela

Abstract

This paper develops a NATREX (NATural Real EXchange rate) model for two large economies, the Eurozone and the United States. The NATREX approach has already been adopted to explain the medium-long term dynamics of the real exchange rate in a number of industrial countries. So far, however, it has been applied to a one-country framework where the "rest of the world" is treated as given. In this paper, we build a NATREX model where the two economies are fully specified and allowed to interact. Our theoretical model offers the basis for empirical estimation of the euro/dollar equilibrium exchange rate that will be carried out in future research. JEL classification: F31; F36; F47

Suggested Citation

  • Belloc, Marianna & Federici, Daniela, 2007. "A Two-Country NATREX Model for the Euro/Dollar," MPRA Paper 4046, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4046
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    Cited by:

    1. Marwil J. Davila-Fernandez & Serena Sordi, 2025. "FX-constrained growth: Fundamentalists, chartists and the dynamic trade-multiplier," Papers 2508.02252, arXiv.org.
    2. Giancarlo Gandolfo, 2015. "The Tobin tax in a continuous-time non-linear dynamic model of the exchange rate," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(6), pages 1629-1643.
    3. Vít Posta, 2011. "The Misalignment of the Real Exchange Rate with the Fundamentals: Evidence from the Czech Republic, Hungary and Poland," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 26.
    4. Daniela Federici & Giancarlo Gandolfo, 2011. "The Euro/Dollar Exchange Rate: Chaotic or Non-Chaotic?," CESifo Working Paper Series 3420, CESifo.
    5. Jean-François Hoarau, 2013. "Un modèle NATREX synthétique pour une petite économie « développée » ouverte contrainte sur les marchés internationaux de capitaux," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(4), pages 259-303.
    6. Chen, Xiaoshan & MacDonald, Ronald, 2014. "Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model," SIRE Discussion Papers 2015-05, Scottish Institute for Research in Economics (SIRE).
    7. Patrik Abrahámek, 2017. "Importance of the Debt-Adjusted Real Exchange Rate in the Eurozone and V4," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 65(4), pages 1325-1337.
    8. Nikolaos Giannellis & Minoas Koukouritakis, 2011. "Behavioural equilibrium exchange rate and total misalignment: evidence from the euro exchange rate," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(4), pages 555-578, November.
    9. Chen, Xiaoshan & MacDonald, Ronald, 2014. "Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-05, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Federici, Daniela & Gandolfo, Giancarlo, 2012. "The Euro/Dollar exchange rate: Chaotic or non-chaotic? A continuous time model with heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 670-681.
    11. Chen, Xiaoshan & MacDonald, Ronald, 2015. "Measuring the dollar–euro permanent equilibrium exchange rate using the unobserved components model," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 20-35.

    More about this item

    Keywords

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    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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