In this paper, we assess the equilibrium value of the Mauritian rupee in 2006-07 and over the medium run using two structural models. First, we derive a current account-based measure of the exchange rate equilibrium using the macroeconomic balance approach. Second, we estimate a reduced-form...

In this paper we evaluate the predictive power of the three most popular equilibrium exchange rate concepts: Purchasing Power Parity (PPP), Behavioral Equilibrium Exchange Rate (BEER) and the Macroeconomic Balance (MB) approach. We show that there is a clear trade-off between storytelling and...

Conventional exchange rate theory has proven unreliable in its attempts to explain the real exchange rate. In the March 2003 Reserve Bank Monetary Policy Statement two graphs appeared, one of total net migration and the other the nominal TWI exchange rate. Closer inspection revealed they were...

This paper proposes a network model of multilaterally equilibrium exchange rates. The model introduces a topological component into the exchange rate analysis, consistently taking into account simultaneous higher-order interactions among all currencies. The paper defines the currency demand...

After the decline in oil prices, many oil exporters face the need to improve their externalbalances. Special characteristics of oil exporters make the exchange rate an ineffectiveinstrument for this purpose and give fiscal policy a sizeable role. These conclusions aresupported by regression...

We present a simple behavioral model with chartists and fundamentalists and analyze their trading behavior in a floating regime and in a target zone regime. Regarding the floating regime the model replicates the well-known stylized facts like excessive volatility, fat tails, volatility...

The model of the equilibrium exchange rate of ruble is under construction on the basis of streams of the balance of payments of Russia taking into account trade conditions. Export-import transactions, factors of movement of the capital, a trade condition, indexes of the internal and export...

This paper conducts general equilibrium (GE) estimation to evaluate the empirical contributions of macroeconomic shocks in explaining the exchange rate disconnect, excess volatility, and the uncovered interest parity (UIP) puzzles. We embed stochastic volatilities and limits-to-international...

The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat...

In this paper we evaluate the predictive power of the three most popular equilibrium exchange rate concepts: Purchasing Power Parity (PPP), Behavioral Equilibrium Exchange Rate (BEER) and the Macroeconomic Balance (MB) approach. We show that there is a clear trade-off between storytelling and...