This paper provides an empirical analysis of the decomposition of UK real exchange rates into the relative price of traded goods and the ratio of the relative price of non-traded to traded goods, and tests the prediction that deviations from the law of one price in tradable goods dominate real...

The purpose of this study is to estimate the effects of Real Effective Exchange Rate (REER) on Sudan trade balance (TB). The present situation is confusing for all in Sudan with discrepancies in market effective foreign currencies and government declared prices. For example, one US$ in the...

This paper consists of two parts. In the first part the sensitivity of PPP testing to the nature of the unit root tests is demonstrated. Three unit root tests are employed for fourteen real bilateral exchange rates. The first two, the augmented Dickey-Fuller test and the Phillips-Perron test are...

This paper describes in detail the methodology currently used by the European Central Bank (ECB) to determine the nominal and real effective exchange rate indices of the euro. Building on the work of Buldorini et al. (2002), it shows how the ECB's techniques for calculating effective exchange...

In the past decade, some observers have noted an unusual aspect of the Mexican peso's behavior: During periods when the U.S. dollar has risen (fallen) against other major currencies such as the euro, the peso has risen (fallen) against the dollar. Very few other currencies display this behavior....

The paper presents an N-country model with stock markets, in which a closed-form solution for the real exchange rate is derived. Risky asset prices and allocation of risky assets among countries are determined endogenously. Such a framework allows an analysis of how fundamental parameters, such...

This paper proposes an equilibrium relationship between expected exchange rate changes and differentials in expected returns on risky assets. We show that when expected returns on a risky asset in a certain economy are higher than the returns that are expected from investing in a risky asset in...

The nominal effective exchange rate (EER) of a currency is an index of the tradeweighted average of its bilateral exchange rates vis-à-vis the currencies of selected trading partners, while the real EER is derived by adjusting the nominal index for relative prices or costs. The nominal EER...

In the current paper, a new and simple currency valuation model called the ratio model is proposed based on the Penn effect (a systematic deviation of the purchasing power parity (PPP)). The ratio model, which reduces the uncertainty of the econometric specification that many other valuation...

A simple currency valuation model is given. The model is based on the Penn effect but reduces the uncertainty of the econometric specification that the Penn effect and many other models have. We use the model to valuate eleven main currencies’ bilateral real exchange rate against the US dollar...