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Comparing alternative methodologies for real exchange rate assessment
| Content Provider | Semantic Scholar |
|---|---|
| Author | Salto, Matteo Turrini, Alessandro |
| Copyright Year | 2010 |
| Abstract | This paper compares alternative methodologies for estimating real exchange rate misalignment for EU countries. It is shown that current account-based approaches (based on NFA stabilisation and current account norms) and relative-price based approaches (BEER and PPP-based) deliver broadly consistent assessments, however sometimes differences are non-negligible. Moreover, the behaviour of the two relative price-based approaches does not appear to be as fully aligned as expected. Current account-based misalignment appears to be driven to a larger extent by shocks affecting domestic absorption and national savings and quite often becomes manifest before price-based misalignment. All misalignment measures, and especially the BEER, are significantly related with medium-term developments in real exchange rates (overvaluation implying a forthcoming reduction in the REER), while only current-account based misalignment is a significant predictor of forthcoming current account developments. |
| Starting Page | 1 |
| Ending Page | 54 |
| Page Count | 54 |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp427_en.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
