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A Fair Exchange? Theory and Practice of Calculating Equilibrium Exchange Rates, Jaewoo Lee, Hamid Faruqee, Tamim Bayoumi

Abstract
We develop a theory-based model of equilibrium exchange rates incorporating factors that have been found to matter empirically. The model provides insights into how variables should be measured and what are appropriate cross-country restrictions. We estimate this model using a panel of 12 industrial countries. The model fits the data relatively well, implying relatively fast adjustment to equilibrium and outperforming a random walk at longer horizons. Furthermore, we find that the rate of adjustment depends on the distance from equilibrium, suggesting that part of the explanation for slow adjustment is inaccurate measures of equilibrium
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. EXCHANGE RATE MODEL""; ""III. DATA AND SPECIFICATION""; ""IV. ESTIMATION RESULTS""; ""V. CONCLUSION""; ""REFERENCES""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (28 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781452799599

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