Estimating Iceland’s Real Equilibrium Exchange Rate

ByRobert Tchaidze

December 1, 2007

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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

Given recent developments in Iceland, this paper evaluates its real exchange rate disequilibrium. It discusses three approaches to estimating the equilibrium values and suggests that the adjustment needed to bring the real exchange rate in line with fundamentals is in the range of 15-25 percent, although timing and manner of this adjustment is unclear.

Subject: Current account, Current account deficits, Real effective exchange rates, Real exchange rates, Trade balance

Keywords: GDP, REER, WP

Pages:
17
Volume:
2007
DOI:
https://doi.org/10.5089/9781451868395.001
Issue:
276
Series:
Working Paper No. 2007/276
Stock No:
WPIEA2007276
ISBN:
9781451868395
ISSN:
1018-5941

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