Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates?

Jamel Saadaoui ()
Additional contact information
Jamel Saadaoui: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: The reduction of global imbalances observed during the climax of crisis is incomplete. In this context, currencies realignments are still proposed to ensure global macroeconomic stability. These realignments are based on equilibrium rates derived from equilibrium exchange rate models. Among these models, we have the fundamental equilibrium exchange rate model introduced by Williamson (1994). This approach is often labelled as normative mainly because the equilibrium is not uniquely determined. If the FEER is not related either in the short or in the long to the real exchange rates, we see no clear justification to intervene in foreign exchange markets based on these equilibrium rates. In this case, the FEER does not include any element of long run predictive value and should not be used to reduce global imbalances. This paper provides panel empirical evidences that the FEER is related to real exchange rate in the long run and thus could be a useful tool to prevent the resurgence of large global imbalances and associated risks.

Keywords: Global Imbalances; Equilibrium Exchange Rate; International Monetary Cooperation (search for similar items in EconPapers)
Date: 2013-10-24
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00861163v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 17th Conference of the Research Network Macroeconomics and Macroeconomic Policies (FMM), Oct 2013, Berlin, Germany

Downloads: (external link)
https://shs.hal.science/halshs-00861163v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00861163

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().