The uncovered interest rate parity condition lies at the heart of the "impossible trinity", stating that the three objectives of fixed exchange rates, free capital flows, and independent monetary policy cannot be pursued simultaneously. We argue that although monetary unification does indeed...

We assess the behavior of real effective exchange rates (REERs) of members of the CEMAC zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments are derived for the period 1980 to...

We assess the behavior of real effective exchange rates (REERs) of members of the CEMAC zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments are derived for the period 1980 to...

This working paper was written by Juan Carlos Martinez Oliva (Bank of Italy).In view of the debate on exchange rate stabilization in Asia, this paper introduces a new and original approach to the determination of equilibrium real exchange rates (ERER) across ASEAN+3. Existing literature usually...

Following the debate on exchange rate stabilization within the ASEAN 3, this paper presents a new approach to the determination of real equilibrium exchange rates in the region based on a general equilibrium approach. Based on the real bilateral export and import flows across the region, this...

In a country such as China, which maintains strict controls on foreign exchange and frequently intervenes in the currency market, it is not surprising that the local currency is persistently undervalued in nominal terms. Normally, one would expect such a policy of deliberate currency...

Constructing an open economy Lewisian growthmodel withth ree sectors, we analyze the relationship between economic growth and the level of absolute prices. We show that the absolute price level will not increase until the economy reaches the Lewisian turning point. In addition, we show that in...

In a country such as China, which maintains strict controls on foreign exchange and frequently intervenes in the currency market, it is not surprising that the local currency is persistently undervalued in nominal terms. Normally, one would expect such a policy of deliberate currency...

This paper examines the persistent properties of 12 sectoral relative prices between Korea and Japan obtained following the Classification of Individual Consumption according to Purpose (COICOP) over the period of 1985-2016. Applying a new econometric method developed by Pesaran which controls...

Equilibrium exchange rate theories make the assumption that the Real Equilibrium Exchange Rate (RER) is independent from internal equilibrium and economic policies. We develop a model in which economic policies depend on the minimisation of an intertemporal loss function, and we show that in a...