Endogenous Growth in an Open Economy and the Real Exchange Rate
29 Pages Posted: 21 Aug 2001
Date Written: July 2001
Abstract
This paper is a step in the direction of a larger research project aimed at determining the long run equilibrium value of the euro/dollar real exchange rate. Given this value, one could then give a precise meaning to the notion of undervaluation or overvaluation of the euro, and calculate its misalignment. The problem however arises of how to assess the reliability of such misalignment calculations. In our opinion, we must have a benchmark (namely a period in which we exactly know from outside sources the misalignment itself), against which we can test the validity of the model underlying our calculations. This of course is not (yet) possible for the euro, so that all the calculations of the misalignment of the euro that have been made can only be compared with one another, without knowing which is the good one. Hence, before building a model to be applied to the euro/dollar, we tested our ideas incorporating them in a basic model to be applied to the lira/dollar in a period in which we do exactly know the actual misalignment of the lira from outside sources.
Keywords: NATREX, Equilibrium Exchange Rates, International Capital Flows, Misalignment
JEL Classification: F43, F31, C39, C59
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
International Evidence on Tradables and Nontradables Inflation
-
By Matthew B. Canzoneri, Robert E. Cumby, ...
-
International Evidence on Tradables and Nontradable Inflation
-
Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers
By Peter B. Clark and Ronald Macdonald
-
Real Exchange Rates in the Developing Countries: Concepts and Measure- Ment
-
The EMS, the Emu, and the Transition to a Common Currency
By Kenneth Froot and Kenneth Rogoff
-
Real Exchange Rates and Productivity Growth in the United States and Japan
-
Asset Markets, Exchange Rates and the Balance of Payments
By Jacob A. Frenkel and Michael L. Mussa
-
By Enrique Alberola, Humberto Lopez, ...
-
Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence