World-consistent equilibrium exchange rates

Agnès Benassy-Quere, Amina Lahrèche-Révil and Valérie Mignon ()

Journal of the Japanese and International Economies, 2011, vol. 25, issue 2, 12-32

Abstract: This paper proposes a systematic analysis of the problem of world consistency when deriving equilibrium exchange rates. World inconsistency can arise for two reasons. First, real effective misalignments of currencies out of the considered sample are implicitly assumed to be the mirror image of those of the currencies under review. Second, only NÂ -Â 1 independent bilateral equilibrium exchange rates can be derived from a set of N effective rates. Here we measure the extent of these two problems by estimating equilibrium exchange rates for 15 countries of the G20 in effective as well as bilateral terms and by varying the assumptions concerning the rest of the world (RoW) and the numeraire currency. Our results show that the way the rest of the world is tackled has a major impact on the calculation of effective misalignments and especially bilateral misalignments.

Keywords: Equilibrium; exchange; rates; BEER; approach; World; consistency (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0889158309000094
Full text for ScienceDirect subscribers only

Related works:
Working Paper: World Consistent Equilibrium Exchange Rates (2011)
Working Paper: World Consistent Equilibrium Exchange Rates (2011)
Working Paper: World Consistent Equilibrium Exchange Rates (2011)
Working Paper: World Consistent Equilibrium Exchange Rates (2006)
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:jjieco:v:25:y:2011:i:2:p:12-32

Access Statistics for this article

Journal of the Japanese and International Economies is currently edited by Takeo Hoshi

More articles in Journal of the Japanese and International Economies from Elsevier
Bibliographic data for series maintained by Catherine Liu ().