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Estimating Iceland's Real Equilibrium Exchange Rate

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  • Robert Tchaidze

    (International School of Economics at Tbilisi State University)

Abstract

Given recent developments in Iceland, this paper evaluates its real exchange rate disequilibrium. It discusses three approaches to estimating the equilibrium values and suggests that the adjustment needed to bring the real exchange rate in line with fundamentals is in the range of 15-25 percent, although timing and manner of this adjustment is unclear.

Suggested Citation

  • Robert Tchaidze, 2008. "Estimating Iceland's Real Equilibrium Exchange Rate," Working Papers 007-08, International School of Economics at TSU, Tbilisi, Republic of Georgia.
  • Handle: RePEc:tbs:wpaper:08-007
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    File URL: http://www.iset.ge/files/007-08.pdf
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    References listed on IDEAS

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    1. 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.
    2. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    3. Tamim Bayoumi & Jaewoo Lee & Sarma Jayanthi, 2006. "New Rates from New Weights," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 1-4.
    4. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment; Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
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