On currency misalignments within the euro area

Virginie Coudert (), Cécile Couharde () and Valérie Mignon ()
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Virginie Coudert: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: Although nominal parities have been completely fixed within the euro area since the launch of the single currency, real effective exchange rates have continued to vary under the effect of inflation disparities, exhibiting a strong appreciation in the peripheral countries. In this paper, we assess real exchange rate misalignments for euro area countries by using a Behavioral Equilibrium Exchange Rate (BEER) approach on the period 1980-2010. The results show that the peripheral member countries have been suffering from increasingly overvalued exchange rates since the mid-2000s, as their real appreciation has not stemmed from improving fundamentals in terms of productivity or external position. In addition, currency misalignments have been increased on average for all euro area countries since monetary union, while becoming more persistent. More worryingly, our findings highlight different patterns across members, as misalignments have been larger and more persistent in peripheral countries than in core countries.

Keywords: euro area; real equilibrium exchange rates; misalignments; panel cointegration (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-04141061
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Related works:
Journal Article: On Currency Misalignments within the Euro Area (2013)
Working Paper: On Currency Misalignments within the Euro Area (2013)
Working Paper: On currency misalignments within the euro area (2012)
Working Paper: On currency misalignments within the euro area (2012)
Working Paper: On currency misalignments within the euro area (2012)
Working Paper: On currency misalignments within the euro area (2012)
Working Paper: On currency misalignments within the euro area (2012)
Working Paper: On currency misalignments within the euro area (2012)
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