EconPapers    
Economics at your fingertips  
 

Global imbalances: Should we use fundamental equilibrium exchange rates?

Jamel Saadaoui ()

Economic Modelling, 2015, vol. 47, issue C, 383-398

Abstract: The reduction of global imbalances observed during the climax of crisis is incomplete. In this context, currencies' realignments are still proposed to ensure global macroeconomic stability. These realignments are based on equilibrium rates derived from equilibrium exchange rate models. Among these models, we have the fundamental equilibrium exchange rate model introduced by Williamson (1994). This approach is often labelled as normative mainly because the equilibrium is not uniquely determined. If the FEER is not related either in the short run or in the long run to the real exchange rates, we see no clear justification to intervene in foreign exchange markets based on these equilibrium rates. In this case, the FEER does not include any element of long run predictive value and should not be used to reduce global imbalances. This paper provides panel empirical evidences that the FEER is related to real exchange rate in the long run and thus could be a useful tool to prevent the resurgence of large global imbalances and associated risks.

Keywords: Global imbalances; Equilibrium exchange rate; International monetary cooperation (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999315000243
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Global imbalances: Should we use fundamental equilibrium exchange rates? (2015)
Working Paper: Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates? (2013) Downloads
Working Paper: Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates (2013) Downloads
Working Paper: Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates? (2012) Downloads
Working Paper: Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates? (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:47:y:2015:i:c:p:383-398

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-08-09
Handle: RePEc:eee:ecmode:v:47:y:2015:i:c:p:383-398