The Exchange Rate Macroeconomic Balance Approach: New Methodology and Results for the Euro, the Dollar, the Yen and the Pound sterling

Cécile Couharde () and Didier Borowski
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Didier Borowski: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper presents an extension of the macroeconomic exchange rate balance approach. Thisextension comprises two new aspects. Firstly, it is based on a multinational framework whichallows for macroeconomic linkages between countries. Secondly, it uses a procedure that does notrequire a full modeling of the world economy to derive a consistent set of equilibrium exchangerates. The findings reveal that, in 2001, the dollar was overvalued against the euro and the yen.The paper also shows that this result depends heavily on the chosen notion of current accountsustainability.

Keywords: equilibrium exchange rate; macroeconomic balance approach; current account sustainability (search for similar items in EconPapers)
Date: 2003
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Published in Open Economies Review, 2003, 14, pp.169-190

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Journal Article: The Exchange Rate Macroeconomic Balance Approach: New Methodology and Results for the Euro, the Dollar, the Yen and the Pound Sterling (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00119117

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