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Author: Mr.Angel J. Ubide
Publisher: International Monetary Fund
ISBN: 1451858736
Category : Business & Economics
Languages : en
Pages : 44
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Book Description
This paper presents a methodology for calculating bilateral equilibrium exchange rates for a panel of currencies in a way that guarantees global consistency. The methodology has three parts: a theoretical model that encompasses the balance of payments and the Balassa-Samuelson approaches to real exchange rate determination; an unobserved components decomposition in a cointegration framework that identifies a time-varying equilibrium real exchange rate; and an algebraic transformation that extracts bilateral equilibrium nominal rates. The results uncover that, by the start of Stage III of the European Economic and Monetary Union (EMU), the euro was significantly undervalued against the dollar and the pound, but overvalued against the yen. The paper also shows that the four major EMU currencies locked their parities with the euro at a rate close to equilibrium.
Author: Mr.Angel J. Ubide
Publisher: International Monetary Fund
ISBN: 1451858736
Category : Business & Economics
Languages : en
Pages : 44
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Book Description
This paper presents a methodology for calculating bilateral equilibrium exchange rates for a panel of currencies in a way that guarantees global consistency. The methodology has three parts: a theoretical model that encompasses the balance of payments and the Balassa-Samuelson approaches to real exchange rate determination; an unobserved components decomposition in a cointegration framework that identifies a time-varying equilibrium real exchange rate; and an algebraic transformation that extracts bilateral equilibrium nominal rates. The results uncover that, by the start of Stage III of the European Economic and Monetary Union (EMU), the euro was significantly undervalued against the dollar and the pound, but overvalued against the yen. The paper also shows that the four major EMU currencies locked their parities with the euro at a rate close to equilibrium.
Author: Enrique Alberola
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
This paper presents a methodology for calculating bilateral equilibrium exchange rates for a panel of currencies in a way that guarantees global consistency. The methodology has three parts: a theoretical model that encompasses the balance of payments and the Balassa-Samuelson approaches to real exchange rate determination; an unobserved components decomposition in a cointegration framework that identifies a time-varying equilibrium real exchange rate; and an algebraic transformation that extracts bilateral equilibrium nominal rates. The results uncover that, by the start of Stage III of the European Economic and Monetary Union (EMU), the euro was significantly undervalued against the dollar and the pound, but overvalued against the yen. The paper also shows that the four major EMU currencies locked their parities with the euro at a rate close to equilibrium.
Author: Mr.Tarhan Feyzioglu
Publisher: International Monetary Fund
ISBN: 1451853173
Category : Business & Economics
Languages : en
Pages : 25
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Book Description
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: John Williamson
Publisher: Peterson Institute
ISBN: 9780881320763
Category : Business & Economics
Languages : en
Pages : 608
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Book Description
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: Peter Isard
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
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: Mr.Alexei P Kireyev
Publisher: International Monetary Fund
ISBN: 1498351336
Category : Business & Economics
Languages : en
Pages : 23
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Book Description
This paper proposes a network model of multilaterally equilibrium exchange rates. The model introduces a topological component into the exchange rate analysis, consistently taking into account simultaneous higher-order interactions among all currencies. The paper defines the currency demand indicator. On its base, it derives a multilateral exchange rate network, finds its dynamically stationary position, and identifies the multilaterally equilibrium levels of bilateral exchanges rates. Potentially, the model can be developed further to calculate the deviations of the observed bilateral exchange rates from their multilaterally equilibrium levels, which can be interpreted as their over- or undervaluation. For illustration, the model is applied to daily 1995-2016 exchange rates among 130 currencies sourced from the Thomson Reuters Datastream.
Author: David Bigman
Publisher: Beard Books
ISBN: 9781587981296
Category : Business & Economics
Languages : en
Pages : 356
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Book Description
Analyzes developments in the international monetary system since 1973, with anew added epilogue.
Author: John Williamson
Publisher: Columbia University Press
ISBN: 0881324795
Category : Business & Economics
Languages : en
Pages : 104
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Book Description
Growing global imbalances threaten to induce a collapse of the dollar, which could in turn produce a severe recession in the rest of the world. This crisis could force countries to say "never again" and search for a system to prevent similar disasters. The system that could do so is a reference rate system—where countries' authorities are forbidden from intervening in order to push the exchange rate too far from what is termed the "reference rate." It could help a country's authorities manage its exchange rate to avoid large misalignments, assist the private sector in forming more dependable expectations of future exchange rates and thus to manage their businesses more efficiently in a world of floating exchange rates, and aid the International Monetary Fund in designing and managing an effective system of multilateral surveillance. The world economy would function better as a result, with less chance of the global imbalances leading to a world recession.
Author: Tamim Bayoumi
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781451862485
Category : Equilibrium (Economics)
Languages : en
Pages : 28
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Book Description
We develop a theory-based model of equilibrium exchange rates incorporating factors that have been found to matter empirically. The model provides insights into how variables should be measured and what are appropriate cross-country restrictions. We estimate this model using a panel of 12 industrial countries. The model fits the data relatively well, implying relatively fast adjustment to equilibrium and outperforming a random walk at longer horizons. Furthermore, we find that the rate of adjustment depends on the distance from equilibrium, suggesting that part of the explanation for slow adjustment is inaccurate measures of equilibrium.
Author: Tamim Bayoumi
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 58
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Book Description
