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Estimation of Consistent Multi-Country FEERs

Benjamin Carton () and Karine Herve

Working Papers from CEPII research center

Abstract: Most studies on equilibrium exchange rates focus on a limited number of G7 countries. But in a situation of world imbalances, emerging countries can no longer be excluded. The study of all equilibrium exchange rates is delicate. First, the trade model has to be balanced at the aggregate level. This paper suggests a method to achieve world balance both in volume and in value. Second, the N-1 bilateral exchange rates cannot ensure that the N areas will reach their macroeconomic equilibrium simultaneously. This paper examines the existing solutions to solve the N-1 problem and proposes an alternative which minimizes the distance to the current-account targets. Finally, in order to compare the relevance of the different methodologies, FEERs are calculated for 19 industrialized and developing countries.

Keywords: EXCHANGE RATES; CURRENT ACCOUNT ADJUSTMENT (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cba and nep-ifn
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Journal Article: Estimation of consistent multi-country FEERs (2012) Downloads
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