Australia and New Zealand Exchange Rates: A Quantitative Assessment

Author/Editor: Edison, Hali J. ; Vitek, Francis
Publication Date: January 01, 2009
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The paper describes three empirical models commonly used to conduct exchange rate assessments and applies them to data for Australia and New Zealand. The baseline results using data and mediumterm projections available as of October 2008, suggest that the Australian and New Zealand dollars were broadly in line with fundamentals, but with a wide variation across models. A battery of sensitivity tests illustrate that altering the underlying assumptions can yield substantially different assessments. The results are particularly sensitive to the choice of assessment horizon, the set of economies included in the sample, medium-term forecasts, and the exchange rate reference period.
Series: Working Paper No. 09/7
Subject(s): Australia | New Zealand | Exchange rate assessments | Real effective exchange rates | Fiscal sustainability | Forecasting models

Author's Keyword(s): Exchange rate assessments | macroeconomic balance approach | equilibrium real exchange rate approach | external sustainability approach
Publication Date: January 01, 2009
Format: Paper
Stock No: WPIEA2009007 Pages: 31
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