A model of Equilibrium Exchange Rates for the New Zealand and Australian dollar

Simon Wren-Lewis

No DP 2004/07, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: This paper extends the `Five Area Bilateral Equilibrium Exchange Rate' (FABEER) model used in Wren-Lewis (2003) to include New Zealand and Australia. This model calculates medium term exchange rates conditional on assumptions for `sustainable' current accounts. The model suggests that the equilibrium value of both currencies has been declining over the last ten years and that both currencies were near fair value (on average) during 2002. Equilibrium values against the US dollar are estimated to be around 0.50 (New Zealand) and 0.59 (Australia), although these estimates are sensitive to the assumed equilibrium values for variables like commodity prices and the current account.

JEL-codes: E17 E61 F31 (search for similar items in EconPapers)
Pages: 33 p.
Date: 2004-08
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mac
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2004/07

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