CEPII, Recherche et Expertise sur l'economie mondiale
Estimation of Consistent Multi-Country FEERs

Benjamin Carton
Karine Hervé

 Highlights :

 Abstract :
Most studies on equilibrium exchange rates focus on a limited number of G7 countries. But in a situation of world imbalances, emerging countries can no longer be excluded. The study of all equilibrium exchange rates is delicate. First, the trade model has to be balanced at the aggregate level. This paper suggests a method to achieve world balance both in volume and in value. Second, the N-1 bilateral exchange rates cannot ensure that the N areas will reach their macroeconomic equilibrium simultaneously. This paper examines the existing solutions to solve the N-1 problem and proposes an alternative which minimizes the distance to the current-account targets. Finally, in order to compare the relevance of the different methodologies, FEERs are calculated for 19 industrialized and developing countries.


 JEL : F31, F32
CEPII Working Paper
N°2010-02, February 2010

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 Fields of expertise

Money & Finance