Estimating the Equilibrium Real Exchange Rate: An Application to Finland

Tarhan Feyzioglu

No 1997/109, IMF Working Papers from International Monetary Fund

Abstract: An equilibrium exchange rate is here defined as the level that is consistent with simultaneous internal and external balances as specified in Montiel (1996). Exogenous “fundamental” variables determining these balances are identified. Along the lines of Edwards (1994), a reduced form is estimated with the cointegration technique for Finland for the period 1975-95. The estimation produced a reasonable set of equilibrium exchange rates that appreciate with positive shocks to the terms of trade, world real interest rates, and the productivity differential between Finland and its trading partners.

Keywords: WP; exchange rate; equilibrium exchange rate; appreciated exchange rate; excess demand; productivity differential; real exchange rate; Cointegration; Finland; nominal interest rate; sector result; terms of trade shock; goods output; equilibrium rate; Real exchange rates; Exchange rates; Terms of trade; Real effective exchange rates; Real interest rates; Baltics (search for similar items in EconPapers)
Pages: 24
Date: 1997-09-01
References: Add references at CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=2333 (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:imf:imfwpa:1997/109

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi (amodi@imf.org).