subsequent movements in real effective exchange rates (REER). We find that CGER's estimated misalignments have predictive power … CGER misalignments frequently predict the direction of currency movements correctly, misalignments have tended to be …

subject to random shocks affecting endowments, the terms of trade, and the real interest rate. Equilibrium stochastic … mimics the Harberger-Laursen-Metzler effect, but cannot account for a countercyclical trade balance, the variability of the … real exchange rate, and the income elasticity of imports. The results also show that the correlation between the trade …