This paper uses a computable general equilibrium model of the economy of Trinidad and Tobago to assess the effects of trade liberalization and terms-of-trade shocks on the real exchange rate and the overall fiscal position of the government. The model is also used to evaluate the implications of...

This paper compares two approaches for examining the extent to which a country’s actual real effective exchange rate is consistent with economic fundamentals: the FEER approach, which involves calculating the real exchange rate that equates the current account at full employment with...

In this paper we extend the BEER (Behavioral Equilibrium Exchange Rate) approach which identifies an estimated equilibrium relationship between the real exchange rate and economic fundamentals. Here the economic fundamentals are decomposed using Johansen cointegration methods into transitory and...

We investigate the long-run relationship between the real exchange rate, traded and nontraded productivity levels, and government spending for 14 OECD countries, using recently developed panel cointegration tests. The results indicate that under certain assumptions it is easier to detect...

This paper examines the long-run determinants of the real exchange rate from a stock-flow perspective. The empirical analysis estimates a long-run relationship between the real exchange rate, net foreign assets and other factors affecting trade flows. Using postwar data for the United States and...

This paper uses an intertemporal optimizing model of a small open economy to analyze how terms of trade changes affect real exchange rates and the trade balance. We consider temporary current, anticipated future, and permanent changes in the terms of trade. The results suggest that the...

Many arguments that have been advanced in favor of maintaining capital controls within the EC have not paid sufficient attention to the welfare consequences of this type of market intervention. Our paper provides a simple, optimizing framework in which the welfare consequences of capital...

Given recent developments in Iceland, this paper evaluates its real exchange rate disequilibrium. It discusses three approaches to estimating the equilibrium values and suggests that the adjustment needed to bring the real exchange rate in line with fundamentals is in the range of 15-25 percent,...