This is one reason behind our view that the krona's
equilibrium exchange rate against the euro has weakened.
It applies the concept of an
equilibrium exchange rate for a recent dataset of African countries which is unique regarding this methodological application.
These models include Goldman Sachss Dynamic
Equilibrium Exchange Rate and the Peterson Institute for International Economics Fundamental
Equilibrium Exchange Rate.
In this case, the downward jump in the exchange rate may reflect a lower
equilibrium exchange rate as exit from the EU may imply some diversification away from high-value financial services and a negative terms of trade shock as there are increased overall costs of trade in both goods and services sectors.
After all, with the Chinese economy undergoing wholesale economic transformation, estimating a long-term
equilibrium exchange rate that will anchor speculation is virtually impossible, particularly given persistent doubts about data quality, disclosure, and opaque policymaking processes.
When these parameters approach infinity, however, relative inflation and the
equilibrium exchange rate are constant.
The speed of adjustment coefficient indicates that 17 percent of divergence from long-run
equilibrium exchange rate path is being corrected in each quarter.
Keblowski and Welfe (2011) propose a new modelling of exchange rate that extends the capital enhanced
equilibrium exchange rate (CHEER) model, which is the combination of the PPP and UIP.
medium-term
equilibrium exchange rate relative to the U.S.
The studies are grounded on one of the approaches that seeks to determine the value of a currency, commonly referred to as the fundamental
equilibrium exchange rate method.
