Is the Yen Undervalued?

Saang Joon Baak ()
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Saang Joon Baak: Waseda University

No 1503e, Discussion papers from ERINA - Economic Research Institute for Northeast Asia

Abstract: This paper measures to what extent the real effective exchange rate of the Japanese yen is misaligned from its equilibrium value by estimating the equilibrium value using the behavioral equilibrium exchange rate (BEER) approach. The economic fundamentals such as the terms of trade, the relative price of non-traded to traded goods, and real interest rate differentials are employed to assess the equilibrium exchange rate. The estimation results using the quarterly data from 1990Q1 to 2014Q4 indicate that the actual exchange rate of the Japanese yen was substantially overvalued from 2008Q4 to 2012Q4. In contrast, it was not substantially misaligned from the equilibrium values from 2013Q1 to 2014Q4.

Keywords: Japanese yen; misalignment; behavioral equilibrium exchange rate (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015-10
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Persistent link: https://EconPapers.repec.org/RePEc:eri:dpaper:1503e

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