Australia and New Zealand Exchange Rates: A Quantitative Assessment

Hali Edison () and Francis Vitek

No 2009/007, IMF Working Papers from International Monetary Fund

Abstract: The paper describes three empirical models commonly used to conduct exchange rate assessments and applies them to data for Australia and New Zealand. The baseline results using data and mediumterm projections available as of October 2008, suggest that the Australian and New Zealand dollars were broadly in line with fundamentals, but with a wide variation across models. A battery of sensitivity tests illustrate that altering the underlying assumptions can yield substantially different assessments. The results are particularly sensitive to the choice of assessment horizon, the set of economies included in the sample, medium-term forecasts, and the exchange rate reference period.

Keywords: WP; growth rate; estimate; Australia; Equilibrium real; Exchange rate assessments; macroeconomic balance approach; equilibrium real exchange rate approach; external sustainability approach; current account norm; overvaluation estimate; New Zealand dollar; exchange rate overvaluation estimate; underlying current account; reference exchange rate; equilibrium exchange rate model; current account gap; sensitivity analysis; Real effective exchange rates; Exchange rates; Current account; Current account balance; Australia and New Zealand (search for similar items in EconPapers)
Pages: 33
Date: 2009-01-01
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Citations: View citations in EconPapers (4)

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