Testing the Equilibrium Exchange Rate Model - Updated

Guilherme Moura () and Sergio Da Silva

MPRA Paper from University Library of Munich, Germany

Abstract: We find favorable evidence for the textbook equilibrium exchange rate model of Stockman (1987) using Blanchard and Quah’s (1989) decomposition. Real shocks are shown to account for more than 90 percent of movements in the real exchange rate between Brazil and the US, and for more than half of nominal exchange rate changes. Impulse response functions also suggest that real shocks alter these countries’relative prices.

Keywords: Equilibrium Exchange Rate Model; Blanchard and Quah’s Decomposition (search for similar items in EconPapers)
JEL-codes: F31 F37 F41 F47 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1871

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