Feers and Uncertainty: Confidence Intervals for the Fundamental Equilibrium Exchange Rate of the Canadian Dollar

1996 ◽  
Author(s):  
Charles F. Kramer
Keyword(s):  
Exchange Rate ◽  
Confidence Intervals ◽  
Canadian Dollar ◽  
Equilibrium Exchange Rate ◽  
Equilibrium Exchange ◽  
Fundamental Equilibrium Exchange Rate

Properties of the fundamental equilibrium exchange rate in the Treasury model

1999 ◽  
Vol 169 ◽  
pp. 96-104 ◽  
Author(s):  
Keith B. Church
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Nominal Exchange Rate ◽  
Equilibrium Exchange Rate ◽  
Natural Rate ◽  
The Real ◽  
Long Run ◽  
Equilibrium Exchange ◽  
The Uk ◽  
Fundamental Equilibrium Exchange Rate

This article calculates the equilibrium real exchange rate for the UK economy. The long-run trade and supply side relationships from HM Treasury's model are used to estimate the level of the real exchange rate consistent with the UK economy growing at its ‘natural’ rate while achieving a sustainable current account position. The model shows that the real exchange rate associated with macroeconomic equilibrium lies well below the actual rate for most of the 1990s. This result has important implications for possible UK participation in the single European currency as, once the nominal exchange rate is fixed, overvaluation can only be corrected by holding UK inflation lower than that elsewhere. Achieving this may be costly in terms of jobs and output.

scholarly journals REER Imbalances and Macroeconomic Adjustments: Evidence from the CEMAC Zone

2020 ◽  
Vol 55 (3) ◽  
pp. 372-381 ◽  
Author(s):  
Simplice A. Asongu ◽  
Joseph Nnanna
Keyword(s):  
Exchange Rate ◽  
Government Expenditure ◽  
Reduced Form ◽  
Equilibrium Exchange Rate ◽  
Economic Fundamentals ◽  
Exchange Rate Fluctuations ◽  
Equilibrium Exchange ◽  
Effective Exchange ◽  
Fundamental Equilibrium Exchange Rate

The European Monetary Union (EMU) crisis holds special lessons for existing monetary unions. We assess the behaviour of real effective exchange rates (REERs) of members of the Central African Economic and Monetary Community zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate model is estimated for associated misalignments. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected associations with the exchange rate fluctuations. The analysis also reveals that only the REER adjustments of Cameroon and Gabon are significant in restoring the long-term equilibrium in the event of a shock. The Cameroonian economic fundamentals of terms of trade, government expenditure and openness have different long-term relations with the REER in comparison to those of other member states. There is no need for an adjustment in the level of the peg based on the present quantitative analysis of REER paths. JEL: F31, F33, F42, F61, O55

Estimating the fundamental equilibrium exchange rate for the czech economy

1999 ◽  
Vol 8 (1) ◽  
Author(s):  
Kateřina Šmídková
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Real Economy ◽  
Equilibrium Exchange Rate ◽  
Financial Flows ◽  
Equilibrium Exchange ◽  
The Exchange Rate ◽  
International Investors ◽  
Exchange Rate Band ◽  
Fundamental Equilibrium Exchange Rate

When currency turbulences hit the CZK in May 1997, the research presented in this paper had been nearly finished. It tried to contribute to the discussion of sustainability of external development of the Czech economy by comparing signals given by a set of indicators to signals implied by the estimates of fundamental equilibrium exchange rate (FEER) for the CZK.<p> Interestingly, the method of indicators did not give an unambiguous answer. Specifically, when applied to the Czech data, debt as well as solvency indicators did not imply a danger of external crisis. Financial indicators with a shorter-time horizon did send some warning signals. Indicators of competitiveness watched by large international investors considered the CZK to be overvalued since 1995.<p> In order to gain more decisive conclusion concerning the danger of external crisis, the structural approach was employed. The model simulations of the FEER indicated that the CZK became overvalued in 1996 with respect to the central parity of the exchange-rate band. This conclusion was quite robust taking into account behavior of both the real economy as well as decisive external financial flows. The Czech experience with currency turbulences provided an unintentional measure on how good the warning indicators were. The FEER methodology was able to conclude that there was a need for a policy shift in the end of 1996 although it did not give the clear warning that the exchange-rate regime itself was not sustainable.

Misalignment, Debt Accumulation and Fundamental Equilibrium Exchange Rates

1995 ◽  
Vol 153 ◽  
pp. 73-83 ◽  
Author(s):  
Michael J. Artis ◽  
Mark P. Taylor
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Current Account ◽  
Hysteresis Effect ◽  
Equilibrium Exchange Rate ◽  
Formal Expression ◽  
Debt Accumulation ◽  
Equilibrium Exchange ◽  
Rules Of Thumb ◽  
Fundamental Equilibrium Exchange Rate

This article deals with hysteresis in the fundamental equilibrium exchange rate (FEER) arising from misalignment. When the actual real exchange rate departs from its FEER value, current account realisations—and consequently, debt service obli gations—will differ from those assumed in the initial FEER calculation, necessitating its recomputation. The article derives a formal expression for this hysteresis effect in the FEER, and derives and applies rules of thumb for computing the hysteresis effect when considering the rate of approach of an exchange rate toward its FEER value.

Estimation of fiscal rule impact on Russian ruble equilibrium exchange rate

2021 ◽  
pp. 70-84
Author(s):  
D. A. Menshikh
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Oil Price ◽  
Real Effective Exchange Rate ◽  
Alternative Methods ◽  
Equilibrium Exchange Rate ◽  
The Real ◽  
Equilibrium Exchange ◽  
Fiscal Rule ◽  
The Impact

This paper describes a new approach that makes it possible to assess the impact of foreign exchange interventions implemented under the fiscal rule on the Russian ruble equilibrium exchange rate. The essence of the approach is to quantify the impact of foreign exchange interventions carried out within the framework of the fiscal rule on the balance of supply and demand of foreign exchange, and to reflect this influence in macroeconomic models using the “effective” oil price indicator. The article describes in detail the calculation of this indicator. The advantage of using the “effective” oil price indicator compared to alternative methods lies in the efficiency (the ability to apply for monthly data), simplicity (the possibility of using for scenario forecasting of the exchange rate), as well as the flexibility of the method (the possibility of taking into account periods of suspension of the fiscal rule and deferred purchases). The current gap in the real effective exchange rate of Russian ruble was calculated based on the data for February 2008 — October 2019. The assessment of the contribution of the fiscal rule to the equilibrium value of the real exchange rate was about 2 pp., at the end of 2019 Russian ruble was overvalued.

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