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- Title
Real Exchange Rates, the Trade Balance and Net Foreign Assets: Long-Run Relationships and Measures of Misalignment.
- Authors
Zhang, Guangfeng; MacDonald, Ronald
- Abstract
In this paper we estimate equilibrium exchange rates for 23 OECD countries and four less mature economies in a panel data setting. Our empirical analysis demonstrates significant links between the trade balance and net foreign assets, and between real exchange rates and the trade balance, rather than between real exchange rates and net foreign asset, as predicted by the model of Lane and Milessi-Ferretti (). Our study indicates that, in terms of the association between real exchange rates and trade balance, there is heterogeneity between the emerging market economies and the OECD countries. Finally, we construct various measures of exchange rate misalignment for all the exchange rates included in our panels.
- Subjects
OECD countries; FOREIGN exchange rates; BALANCE of trade; FOREIGN assets; LONG run (Economics); PANEL analysis; ECONOMIC equilibrium
- Publication
Open Economies Review, 2014, Vol 25, Issue 4, p635
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-013-9294-4