The relationship between REER and trade flows in the context of the equilibrium exchange rate

Reimo Juks ()

No 2003-9, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The paper focuses on the time-series analysis of the traditional trade equations. The results from the cointegration, ARDL and Granger causality analyses of trade elasticities cast some doubt on the usefulness of the internal-external balance approach to the equilibrium exchange rate. The long-run impact of the REER on trade flows turned out to be statistically insignificant, being independent of method and specification of the model employed. The latter implies a secondary role for the REER in achieving a sustainable position of external balance.

New Economics Papers: this item is included in nep-fmk, nep-ifn and nep-int
Date: 2003-11-11, Revised 2003-11-11
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