Does mixed frequency vector error correction model add relevant information to exchange misalignment calculus? Evidence for United States
Beatrice Aline Zimmermann,
Diogo Mendonça and
Giovanni Merlin ()
No 385, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)
Real exchange rate is an important macroeconomic price in the economy and a ects economic activity, interest rates, domestic prices, trade and investiments ows among other variables. Methodologies have been developed in empirical exchange rate misalignment studies to evaluate whether a real e ective exchange is overvalued or undervalued. There is a vast body of literature on the determinants of long-term real exchange rates and on empirical strategies to implement the equilibrium norms obtained from theoretical models. This study seeks to contribute to this literature by showing that it is possible to calculate the misalignment from a mixed ointegrated vector error correction framework. An empirical exercise using United States' real exchange rate data is performed. The results suggest that the model with mixed frequency data is preferred to the models with same frequency variables
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Working Paper: DOES MIXED FREQUENCY VECTOR ERROR CORRECTION MODEL ADD RELEVANT INFORMATION TO EXCHANGE MISALIGNMENT CALCULUS? EVIDENCE FOR UNITED STATES (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:385
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