How Robust Are Estimates Of Equilibrium Real Exchange Rates

Author : Steven Vincent Dunaway,Lamin Leigh,Xiangming Li
Publisher : Unknown
Page : 20 pages
File Size : 44,6 Mb
Release : 2006
Category : Equilibrium (Economics)
ISBN : UCSD:31822034343285

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How Robust are Estimates of Equilibrium Real Exchange Rates by Steven Vincent Dunaway,Lamin Leigh,Xiangming Li Pdf

Increased attention is being paid to assessments of the actual values of countries' real exchange rates relative to their "equilibrium" values as suggested by "fundamental" determining factors. This paper assesses the robustness of alternative approaches and models commonly used to derive equilibrium real exchange rate estimates. Using China's currency to illustrate this analysis, the variance in estimates raises serious questions regarding how robust the results are. The basic conclusion from the tests used here is that, at least for China, small changes in model specifications, explanatory variable definitions, and time periods used in estimation can lead to very substantial differences in equilibrium real exchange rate estimates. Thus, such estimates should be treated with great caution.

Author : Mr.Tarhan Feyzioglu
Publisher : International Monetary Fund
Page : 25 pages
File Size : 47,9 Mb
Release : 1997-09-01
Category : Business & Economics
ISBN : 9781451853179

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Estimating the Equilibrium Real Exchange Rate by Mr.Tarhan Feyzioglu Pdf

An equilibrium exchange rate is here defined as the level that is consistent with simultaneous internal and external balances as specified in Montiel (1996). Exogenous “fundamental” variables determining these balances are identified. Along the lines of Edwards (1994), a reduced form is estimated with the cointegration technique for Finland for the period 1975-95. The estimation produced a reasonable set of equilibrium exchange rates that appreciate with positive shocks to the terms of trade, world real interest rates, and the productivity differential between Finland and its trading partners.

Author : Tamim Bayoumi
Publisher : Unknown
Page : 58 pages
File Size : 44,5 Mb
Release : 1994
Category : Foreign exchange rates
ISBN : UCSD:31822016815946

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Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies by Tamim Bayoumi Pdf

Author : Jerome L. Stein,Polly Reynolds Allen
Publisher : Oxford University Press
Page : 273 pages
File Size : 54,6 Mb
Release : 1997
Category : Business & Economics
ISBN : 9780198293064

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Fundamental Determinants of Exchange Rates by Jerome L. Stein,Polly Reynolds Allen Pdf

Neo-classical in its stress on fundamentals that drive a real economy, this study also offers an alternative paradigm to describe and explain short-run movements of nominal exchange rates.

Author : Ronald MacDonald,Jerome L. Stein
Publisher : Springer Science & Business Media
Page : 353 pages
File Size : 48,7 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9789401144117

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Equilibrium Exchange Rates by Ronald MacDonald,Jerome L. Stein Pdf

How successful is PPP, and its extension in the monetary model, as a measure of the equilibrium exchange rate? What are the determinants and dynamics of equilibrium real exchange rates? How can misalignments be measured, and what are their causes? What are the effects of specific policies upon the equilibrium exchange rate? The answers to these questions are important to academic theorists, policymakers, international bankers and investment fund managers. This volume encompasses all of the competing views of equilibrium exchange rate determination, from PPP, through other reduced form models, to the macroeconomic balance approach. This volume is essentially empirical: what do we know about exchange rates? The different econometric and theoretical approaches taken by the various authors in this volume lead to mutually consistent conclusions. This consistency gives us confidence that significant progress has been made in understanding what are the fundamental determinants of exchange rates and what are the forces operating to bring them back in line with the fundamentals.

Author : Mr.Ronald MacDonald
Publisher : International Monetary Fund
Page : 54 pages
File Size : 45,6 Mb
Release : 1997-02-01
Category : Business & Economics
ISBN : 9781451921670

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What Determines Real Exchange Rates? The Long and Short of it by Mr.Ronald MacDonald Pdf

This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.

Author : Magnus Saxegaard
Publisher : Unknown
Page : 54 pages
File Size : 45,6 Mb
Release : 2007
Category : Electronic
ISBN : OCLC:815733186

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Estimation of Equilibrium Exchange Rates in the Waemu by Magnus Saxegaard Pdf

Using the FEER approach we investigate the long-run equilibrium paths of the real effective exchange rates (REERs) of countries in the West African Economic and Monetary Union (WAEMU). In an attempt to address econometric estimation uncertainty, we employ both single-country (Johansen and ARDL) and panel-data (FMOLS and PMG) cointegration techniques. We find that (i) much of the long-run behavior of REERs in WAEMU countries can be explained by fluctuations in terms of trade, government consumption, investment, and productivity; (ii) the use of different econometric techniques suggests that there is significant uncertainty about the path of the underlying equilibrium REERs and the degree of exchange rate misalignment, which underscores the need for robustness analyses in exchange rate modeling; and (iii) results from panel-data cointegration may sometimes be useful, but should always be complemented with single-country estimations to ensure that the results take into account country-specific characteristics.

Author : John Williamson
Publisher : Peterson Institute
Page : 608 pages
File Size : 51,5 Mb
Release : 1994
Category : Business & Economics
ISBN : 0881320765

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Estimating Equilibrium Exchange Rates by John Williamson Pdf

The problems of exchange rate misalignments and the resulting payments imbalances have plagued the world economy for decades. At the Louvre Accord of 1987, the Group of Five industrial countries adopted a system of reference ranges for exchange rate management, influenced by proposals of C. Fred Bergstan and John Williamson for a target zone system. The reference range approach has, however, been operated only intermittently and half-heartedly, and questions continue to be raised in policy and scholarly circles about the design and operation of a full-fledged target zone regime. This volume, with chapters by leading international economists, explores one crucial issue in the design of a target zone system: the problem of calculating Williamson's concept of the fundamental equilibrium exchange rate (FEER). Williamson contributes an overview of the policy and analytic issues and a second chapter on his own calculations.

Author : Mr.Charalambos G. Tsangarides,Mr.Magnus Saxegaard,Stéphane Roudet
Publisher : INTERNATIONAL MONETARY FUND
Page : 54 pages
File Size : 53,7 Mb
Release : 2007-08-01
Category : Business & Economics
ISBN : 1451867581

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Estimation of Equilibrium Exchange Rates in the WAEMU by Mr.Charalambos G. Tsangarides,Mr.Magnus Saxegaard,Stéphane Roudet Pdf

Using the FEER approach we investigate the long-run equilibrium paths of the real effective exchange rates (REERs) of countries in the West African Economic and Monetary Union (WAEMU). In an attempt to address econometric estimation uncertainty, we employ both single-country (Johansen and ARDL) and panel-data (FMOLS and PMG) cointegration techniques. We find that (i) much of the long-run behavior of REERs in WAEMU countries can be explained by fluctuations in terms of trade, government consumption, investment, and productivity; (ii) the use of different econometric techniques suggests that there is significant uncertainty about the path of the underlying equilibrium REERs and the degree of exchange rate misalignment, which underscores the need for robustness analyses in exchange rate modeling; and (iii) results from panel-data cointegration may sometimes be useful, but should always be complemented with single-country estimations to ensure that the results take into account country-specific characteristics.

Author : Mr.Mohsin S. Khan,Mr.Jonathan David Ostry,International Monetary Fund. Research Department
Publisher : International Monetary Fund
Page : 24 pages
File Size : 45,7 Mb
Release : 1991
Category : Business & Economics
ISBN : UCSD:31822015479462

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Response of the Equilibrium Real Exchange Rate to Real Disturbances in Developing Countries by Mr.Mohsin S. Khan,Mr.Jonathan David Ostry,International Monetary Fund. Research Department Pdf

Using a simple dependent - economy framework, this paper outlines the links between the equilibrium real exchange rate and some of its fundamental exogenous determinants, mainly terms of trade movements and commercial policy changes. Drawing on existing studies of trade flows in developing countries, it is possible to derive plausible quantitative ranges for the response of the equilibrium real exchange rate to both external and policy-induced shocks. The results should be particularly relevant in designing real exchange rate targets and rules that allow for movements in the equilibrium real exchange rate in response to various shocks.

Author : Mr.Guillermo Calvo,Ms.Carmen Reinhart,Mr.Carlos A. Végh Gramont
Publisher : International Monetary Fund
Page : 50 pages
File Size : 42,9 Mb
Release : 1994-02-01
Category : Business & Economics
ISBN : 9781451921212

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Targeting the Real Exchange Rate by Mr.Guillermo Calvo,Ms.Carmen Reinhart,Mr.Carlos A. Végh Gramont Pdf

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.

Author : Mr.Hamid Faruqee
Publisher : International Monetary Fund
Page : 40 pages
File Size : 40,6 Mb
Release : 1994-08-01
Category : Business & Economics
ISBN : 9781451851359

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Long-Run Determinants of the Real Exchange Rate by Mr.Hamid Faruqee Pdf

This paper examines the long-run determinants of the real exchange rate from a stock-flow perspective. The empirical analysis estimates a long-run relationship between the real exchange rate, net foreign assets and other factors affecting trade flows. Using postwar data for the United States and Japan, cointegration analysis supports the finding that the structural factors underlying each country’s net trade and net foreign asset positions determine the long-run path for the real value of the dollar and the yen. The empirical analysis also provides estimates for the underlying stochastic trend in each real exchange rate series.

Author : Mr.C. John McDermott
Publisher : International Monetary Fund
Page : 32 pages
File Size : 47,9 Mb
Release : 1996-05-01
Category : Business & Economics
ISBN : 9781451846928

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Estimation of the Near Unit Root Model of Real Exchange Rates by Mr.C. John McDermott Pdf

The time-series properties of real exchange rates, on a number of definitions, for 22 industrial countries during 1979-95 were used to re-examine whether PPP holds. It is shown that if real exchange rates reverted to a constant mean slowly, say by five percent a month, then at standard levels of significance we should expect 11 of the 22 series examined to yield evidence of mean reversion and to reject that hypothesis of a unit root. Using models that imply a constant unconditional mean or trend-stationary productivity changes, we find that only one of the 22 real exchange rates shows evidence against unit roots. This low rate of rejection of unit roots in real exchange rates can be construed as evidence against PPP.

Author : Peter Isard
Publisher : International Monetary Fund
Page : 54 pages
File Size : 52,6 Mb
Release : 2007-12
Category : Business & Economics
ISBN : UCSD:31822036950368

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Equilibrium Exchange Rates by Peter Isard Pdf

The paper describes six different methodologies that have been used to assess the equilibrium values of exchange rates and discusses their limitations. It applies several of the approaches to data for the United States as of 2006, illustrates that different approaches sometimes provide substantially different assessments, and asks which methodologies deserve the most weight in such situations. It argues that while it is generally desirable to consider the implications of several different approaches, since different approaches provide different types of perspectives, two of the methodologies seem particularly relevant for identifying threats to macroeconomic stability and growth.

Author : Peter B. Clark,Tamim Bayoumi,Steven A. Symansky,Mark Taylor
Publisher : Unknown
Page : 42 pages
File Size : 41,9 Mb
Release : 1994
Category : Electronic books
ISBN : 145184347X

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Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies by Peter B. Clark,Tamim Bayoumi,Steven A. Symansky,Mark Taylor Pdf

This paper explores a number of methodological issues that arise in the calculation of equilibrium exchange rates, which are identified in this paper as those real effective exchange rates consistent with macroeconomic equilibrium, i.e., internal and external balance. A partial equilibrium, comparative static analysis is presented and the methodology is applied to the break-up of the Bretton Woods exchange rate system. Then the dynamic interaction between the current account and the stock of net foreign assets is examined. Finally, the analysis uses a more general equilibrium approach by relying on simulations using MULTIMOD, a multicountry econometric model. The paper demonstrates the extent to which the equilibrium exchange rate calculations depend upon alternative assumptions regarding factors that affect internal and external balance. In addition, results obtained using the comparative static and dynamic macroeconomic approaches are compared.