Modeling of Optimal Exchange Rate

N. Bocharova.

Voprosy Ekonomiki, 2002, vol. 8

Abstract: The question of how to choose the appropriate value of the nominal exchange rate has remained a key concern of macroeconomic policy in transition economies. Basing on the critical analysis of current Russian policy the author suggests one of the models of estimating the appropriate value of the exchange rate for policymakers. The author proposes to estimate a target function of the central bank which is a market-maker in the fixed exchange rate arrangements. This function reflects the relationship between actual real exchange rate misalignment from its equilibrium value and change of GDP, government budget income and inflation, unwillingness to have real appreciation (and thus lose competitiveness of export) and the cost of changing exchange rate arrangements.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:nos:voprec:2002-8-5

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