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N° 2010-02 |
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| February 2010 |
| Estimation of Consistent Multi-Country FEERs |
Benjamin Carton
Karine Hervé |
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| 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. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| F31; F32 |
Keywords |
| Exchange rates; current account adjustment |
JEL classification |
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