Exchange rate misalignments at world and European levels: A FEER approach

Jeong, Seeun; Mazier, Jacques; Saadaoui, Jamel

doi:10.1016/s2110-7017(13)60007-4

Cited by 38 publications

(25 citation statements)

References 16 publications

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“…The focus of this paper is, however, on real exchange rate developments since the start of the monetary union in 1999. Here, the depreciation of the Euro during 1999 and 2000 as well as its marked appreciation in the years 2002–2004 are visible in the time paths for all actual REER except for that of Greece (Jeong et al, ). Greece, Ireland, Portugal and Spain continue appreciating after 2004 right up to the crisis.…”

Section: Resultssupporting

confidence: 92%

“…In a few cases, these concepts have been used to answer the question at hand. Using Fundamental Equilibrium Exchange Rates (FEERs), Jeong et al () find no misalignments of REER at the European level, but they do find misalignments individually in periphery countries. A similar result is obtained by Coudert et al () using behavioral equilibrium exchange rates (BEER, expected to hold at comparably short horizons).…”

Section: Introductionsupporting

confidence: 84%

“…It is, however, far from clear whether the equilibrium REER estimated by Jeong et al () and Coudert et al () are suitable benchmarks for misalignments. In both papers determinants for REER are indicators for macroeconomic fundamentals that were possibly as misaligned as the exchange rate itself (Knedlik and von Schweinitz, ).…”

Section: Introductionmentioning

confidence: 96%

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Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis

El‐Shagi

Lindner

Schweinitz

2015

Rev International Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Were real effective exchange rates (REER) of Euro area member countries drastically misaligned at the outbreak of the global financial crisis? The answer is difficult to determine because economic theory gives no simple guideline for determining the equilibrium values of real exchange rates, and the determinants of those values might have been distorted as well. To overcome these limitations, we use synthetic matching to construct a counterfactual economy for each member as a linear combination of a large set of non-Euro area countries. We find that Euro area crisis countries are best described by a mixture of advanced and emerging economies. Comparing the actual REER with those of the counterfactuals gives sensible estimates of the misalignments at the start of the crisis: All peripheral countries were strongly overvalued, while high undervaluation is only observed for Finland. Terms of use: Documents in

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Section: Resultssupporting

confidence: 92%

Section: Introductionsupporting

confidence: 84%

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Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis

El‐Shagi

Lindner

Schweinitz

2015

Rev International Economics

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“…Estimations of exchange rate misalignments tend to show that important misalignments remain and that it could be possible to go further to reduce them. The undervaluation of the yuan would still be around 20 per cent in real and nominal terms in 2009 (Cline and Williamson, 2010; Jeong et al ., 2010). The euro would be close to its equilibrium value, but with important intra‐European imbalances.…”

Section: Discussionmentioning

confidence: 99%

World Imbalances and Macroeconomic Adjustments: A Three‐country Stock‐flow Consistent Model With Fixed or Flexible Prices

Mazier

Aliti

2011

Metroeconomica

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World macroeconomic adjustments are analysed with a three-country Stock-Flow Consistent (SFC) models. Three SFC models are considered, the first one with a fixed dollar-yuan parity including a version with Chinese foreign reserves' diversification, the second with a flexible dollar-yuan parity which can be freely floating or following a more managed float, the third one being a generalization of the two others with flexible prices instead of constant prices. The fixity of the dollar-yuan parity limits the adjustments facing shocks and world imbalances while a more flexible dollar-yuan exchange rate appears as a powerful adjustment mechanism to reduce these imbalances.

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“…Indeed, a key question is to know whether observed imbalances inside the euro area stem from these adverse movements in real exchange rates. Several papers have addressed this issue by using a fundamental equilibrium exchange rate (FEER) approach for estimating currency misalignments and did find large discrepancies across euro zone countries (Jeong et al, ; Cline and Williamson, ; Carton and Hervé, ). Nevertheless, these studies neither deal with the persistence of those misalignments, nor with the potential impact of the monetary union on this persistence.…”

Section: Introductionmentioning

confidence: 99%

On Currency Misalignments within the Euro Area

Coudert

Couharde

Mignon

2013

Rev International Economics

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Although nominal parities have been completely fixed within the euro area since the launch of the single currency, real effective exchange rates have continued to vary under the effect of inflation disparities, exhibiting a strong appreciation in the peripheral countries. In this paper, we assess real exchange rate misalignments for euro area countries by using a Behavioral Equilibrium Exchange Rate (BEER) approach on the period 1980-2010. The results show that the peripheral member countries have been suffering from increasingly overvalued exchange rates since the mid-2000s, as their real appreciation has not stemmed from improving fundamentals in terms of productivity or external position. In addition, currency misalignments have been increased on average for all euro area countries since monetary union, while becoming more persistent. More worryingly, our findings highlight different patterns across members, as misalignments have been larger and more persistent in peripheral countries than in core countries.

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Exchange rate misalignments at world and European levels: A FEER approach

Cited by 38 publications

References 16 publications

Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis

Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis

World Imbalances and Macroeconomic Adjustments: A Three‐country Stock‐flow Consistent Model With Fixed or Flexible Prices

On Currency Misalignments within the Euro Area

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