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Quo Vadis Real? Estimating the Brazilian Real Exchange Rate Misalignment in Vector Error Correction Model with Structural Change

Emerson Marçal and Fernando Barbi ()

No 10-2010, Working Papers from Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto

Abstract: This paper aims to estimate the equilibrium real exchange rate for the Brazilian economy. The equilibrium exchange rate is defined as the level of exchange rate that guarantees the stability of the net foreign asset position over time. An econometric model is estimated using a Vector Error Correction Model with structural breaks. The main conclusion of the paper is that the Brazilian exchange rate is below its long run values. The model also suggests that the improvement in fundamentals observed in the recent past is about to end. The level of misalignment is estimated at 18% in third quarter of 2009.

Keywords: cointegração; mudança estrutural; taxa de câmbio real e desalinhamento (search for similar items in EconPapers)
JEL-codes: C32 C52 F31 (search for similar items in EconPapers)
Date: 2010
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