Real Exchange Rate Misalignments in the Euro Area

Michael Fidora, Claire Giordano and Martin Schmitz

Open Economies Review, 2021, vol. 32, issue 1, No 3, 107 pages

Abstract: Abstract Building upon a Behavioural Equilibrium Exchange Rate model, estimated at a quarterly frequency since 1999 on a broad sample of 57 countries, this paper assesses both the size and the persistence of real effective exchange rate misalignments of countries that have adopted the euro and of those outside the euro area. The euro area is indeed a poignant example of a currency union in which the nominal exchange rate is irrevocably fixed; the non-euro area economies considered include countries with either flexible or pegged currencies. While misalignments are found to be smaller in the euro area than in the rest of the world, they are also more persistent; however, the persistence in the euro area has decreased after the global financial crisis. Finally, it is found that improvements in the quality of institutions – observed in particular after 2009 within the euro area – reduce the persistence of misalignments.

Keywords: Real effective exchange rate; Equilibrium exchange rate; Currency union; Institutional quality; E24; E30; F00 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://link.springer.com/10.1007/s11079-020-09596-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Real exchange rate misalignments in the euro area (2018)
Working Paper: Real exchange rate misalignments in the euro area (2017)
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:kap:openec:v:32:y:2021:i:1:d:10.1007_s11079-020-09596-1

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-020-09596-1

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().