Assessing interdependence among countries' fundamentals and its implications for exchange rate misalignment estimatesAn empirical exercise based on GVAR

Resumo

Abstract Exchange rates are important macroeconomic prices and changes in these rates affect economic activity, prices, interest rates, and trade flows. Methodologies have been developed in empirical exchange rate misalignment studies to evaluate whether a real effective exchange is overvalued or undervalued. There is a vast body of literature on the determinants of long-term real exchange rates and on empirical strategies to implement the equilibrium norms obtained from theoretical models. This study seeks to contribute to this literature by showing that the global vector autoregressions model (GVAR) proposed by Pesaran and co-authors can add relevant information to the literature on measuring exchange rate misalignment. Our empirical exercise suggests that the estimative exchange rate misalignment obtained from GVAR can be quite different to that using the traditional cointegrated time series techniques, which treat countries as detached entities. The differences between the two approaches are more pronounced for small and developing countries. Our results also suggest a strong interdependence among eurozone countries, as expected.

Ficha do documento

Tipo

Artigo científico

Ano

2018

Instituição

EGV EPGE

Fonte

Revista Brasileira de Economia

Idioma

Inglês

Acesso

Não informado

Identificador

oai:ojs.periodicos.fgv.br:article/62975

Palavras-chave

C52F31F37