Estimating Equilibrium Exchange RatesThe 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. |
Contents
The Robustness of Equilibrium Exchange Rate | 19 |
Real and Monetary Determinants of Real Exchange Rate | 61 |
Estimating LongRun Equilibrium Real Exchange Rates | 93 |
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absorption achieve actual adjustment baseline bilateral calculations Canadian dollar capital flows Chile coefficient cointegration comparative static current account balance current account deficit current account targets DEER depreciation deutsche mark Dickey-Fuller DISRAT dollar domestic dynamic effective exchange rate elasticities Elbadawi equation equilibrium exchange rate equilibrium real exchange ERER error correction exchange rate changes exogenous exports external balance FEER figure fiscal policy foreign debt Fred Bergsten fundamentals Ghana implied important industrial countries inflation International Economics International Monetary International Monetary Fund investment ISBN paper Japan John Williamson lagged macroeconomic macroeconomic policy medium-run misalignment Multimod nominal devaluation nominal exchange rate nontradables overvaluation percent percentage period potential output price index purchasing power parity ratio real appreciation real effective exchange real exchange rate rise simulation stationary steady-state surplus sustainable terms of trade tion trade balance trajectory trend unit root variables