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A Two-Country NATREX Model for the Euro/Dollar

Listed author(s):
  • Belloc, Marianna
  • Federici, Daniela

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

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File URL: https://mpra.ub.uni-muenchen.de/4046/1/MPRA_paper_4046.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4046.

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Date of creation: Apr 2007
Publication status: Published in CIDEI W.P. N. 76 (2007): pp. 1-30
Handle: RePEc:pra:mprapa:4046
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