Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies
IMF Working Papers, February 1, 1994
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Bibliographic details
- Authors: Peter B. Clark, Steven A. Symansky, Tamim Bayoumi, Mark P. Taylor
- Published: February 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451843477.001
Overview and Purpose
- Authors: Peter B. Clark, Steven A. Symansky, Tamim Bayoumi, Mark P. Taylor
- Publication date: February 1, 1994
- Paper identifies equilibrium exchange rates as those real effective exchange rates consistent with macroeconomic equilibrium, i.e., internal and external balance.
- Pages: 50
- Series: Working Paper No. 1994/017
- Issue: 017
- Volume: 1994
- DOI: https://doi.org/10.5089/9781451843477.001
- Stock No: WPIEA0171994
- ISBN: 9781451843477
- ISSN: 1018-5941
Methodological approaches examined
- Partial equilibrium, comparative static analysis:
- The methodology is applied to the break-up of the Bretton Woods exchange rate system.
- Dynamic macroeconomic analysis:
- Examines the dynamic interaction between the current account and the stock of net foreign assets.
- General equilibrium simulations:
- Uses MULTIMOD, a multicountry econometric model, to provide a more general equilibrium approach.
Key substantive findings
- The paper demonstrates the extent to which equilibrium exchange rate calculations depend upon alternative assumptions regarding factors that affect internal and external balance.
- Results obtained using the comparative static and dynamic macroeconomic approaches are compared.
- Application to historical episode:
- Comparative static methodology applied to the break-up of the Bretton Woods exchange rate system.
Subjects and keywords
- Subject: Balance of payments, Current account, Exchange rates, Foreign exchange, International trade, Real effective exchange rates, Real exchange rates, Trade balance
- Keywords: Bretton Woods exchange rate system, Canadian dollar, Current account, current account position, DEER calculation, deutsche mark, equilibrium exchange rate, Europe, exchange rate movement, Exchange rates, GDP ratio, pound sterling, Real effective exchange rates, Real exchange rates, Trade balance, U.S. dollar, WP
Intended contribution
- Clarifies methodological issues in calculating equilibrium real effective exchange rates consistent with internal and external balance.
- Provides comparative analysis across partial equilibrium, dynamic interaction, and multicountry general equilibrium simulation approaches to assess robustness to alternative assumptions.
IMF Working Paper, "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies", Peter B. Clark et al., February 1, 1994.