Estimating the Equilibrium Real Exchange Rate: An Application to Finland
Electronic Access:
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Summary:
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.
Series:
Working Paper No. 1997/109
Subject:
Exchange rates Financial services Foreign exchange International trade Real effective exchange rates Real exchange rates Real interest rates Terms of trade
English
Publication Date:
September 1, 1997
ISBN/ISSN:
9781451853179/1018-5941
Stock No:
WPIEA1091997
Pages:
24
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