Australia’s Medium-run Exchange Rate: A Macroeconomic Balance Approach
We analyse the determinants of Australia’s exchange rate in terms of the approach introduced by Williamson (1983), based on the simultaneous attainment of internal and external balance. Internal balance implies that the economy is operating at its supply potential with no inflationary pressures. External balance is characterised as the sustainable net flow of resources (corresponding to a current account to GDP ratio) between countries when they are in internal balance. The approach provides estimates of the medium-term exchange rate associated with a given current account position, although the estimates are highly sensitive to variations in key parameters.
|Date of creation:||Mar 2003|
|Date of revision:|
|Contact details of provider:|| Postal: GPO Box 3947, Sydney NSW 2001|
Web page: http://www.rba.gov.au/
More information through EDIRC
|Order Information:||Web: http://www.rba.gov.au/forms/rdp-order-form/|
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.:
- MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank, Research Centre.
- Gordon Menzies, 1994. "Explaining the Timing of Australia's Manufactured Export Boom," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(4), pages 72-86.
- Gruen, David W R & Wilkinson, Jenny, 1994.
"Australia's Real Exchange Rate--Is It Explained by the Terms of Trade or by Real Interest Differentials?,"
The Economic Record,
The Economic Society of Australia, vol. 70(209), pages 204-19, June.
- David W.R. Gruen & Jenny Wilkinson, 1991. "Australia’s Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials?," RBA Research Discussion Papers rdp9108, Reserve Bank of Australia.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, May.
- G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
- Luci Ellis, 2001. "Measuring the Real Exchange Rate: Pitfalls and Practicalities," RBA Research Discussion Papers rdp2001-04, Reserve Bank of Australia.
- Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, May.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- David Gruen & Tim Robinson & Andrew Stone, 2002. "Output Gaps in Real Time: Are They Reliable Enough to Use for Monetary Policy?," RBA Research Discussion Papers rdp2002-06, Reserve Bank of Australia.
- Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
- Wilkinson, Jenny, 1992. "Explaining Australia's Imports: 1974-1989," The Economic Record, The Economic Society of Australia, vol. 68(201), pages 151-64, June.
- Rebecca L Driver & Peter F Westaway, 2005. "Concepts of equilibrium exchange rates," Bank of England working papers 248, Bank of England.
- Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
- Simon Wren-Lewis & Rebecca Driver, 1998.
"Real Exchange Rates for the Year 2000,"
Peterson Institute Press: All Books,
Peterson Institute for International Economics, number pa54.
- Simon Wren-Lewis & Rebecca Driver, 1998. "Real Exchange Rates for the Year 2000," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa54, December.
When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2003-03. 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: (Paula Drew)
If references are entirely missing, you can add them using this form.