Of course, all things are not equal, so another interpretation is that the current
equilibrium exchange rates will decline further, reflecting the markets pessimism about the UK economys supply-side outlook and future productivity growth.
estimates of the
equilibrium exchange rates for a number of countries,
Williamson, "2009 Estimates of Fundamental
Equilibrium Exchange Rates", Peterson Institute for International Economics Policy Brief 09-10 (Washington, DC: Peterson Institute for International Economics, June 2009); and "Estimates of Fundamental
Equilibrium Exchange Rates, May 2010", Peterson Institute for International Economics Policy Brief 10-15 (Washington, DC: Peterson Institute for International Economics, June 2010); and W.
Williamson (2012) "Estimates of Fundamental
Equilibrium Exchange Rates," May 2012, Peterson Institute Working Paper.
Most people who are deranged enough to consider the very social science of estimating
equilibrium exchange rates conclude that the "fair value" for the Euro against the Dollar is around 1.
Taiwan's Council for Economic Planning and Development (CEPD) says 'PPP' is a theory of long-term
equilibrium exchange rates based on relative price levels of two countries.
Exchange Rate Regimes and
Equilibrium Exchange Rates in East Asia.
After reviewing the theoretical concepts of
equilibrium exchange rates and their application to the currencies in question, he analyzes recent movements in the external value of the Euro and tests the validity of explanation by monetary factors and by the natural real exchange rate (NATREX) approach.
The estimates of
equilibrium exchange rates obtained in this round are more favourable than those from the two earlier (normalised) SRER estimates in Bulff and Smidkowa (2005) and (2007), see figure 4.
Hence, our notion of equilibrium is very close to the one used for instance in the literature on
equilibrium exchange rates (Behavioral
Equilibrium Exchange Rate--BEER) and in other fields of the economic profession.
The difference between these behavioural
equilibrium exchange rates become more pronounced when the degree of currency misalignment is determined.
