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Exchange Rate Dynamics and Fundamental Equilibrium Exchange Rates
Social Science Research Network
The paper investigates if the most popular alternative to the purchasing parity power approach (PPP) to estimate equilibrium exchange rates, the fundamental equilibrium exchange rate (FEER) influences exchange rate dynamics in the long run. For a large panel of industrialized and emerging countries and on the period 1982-2007, we detect the presence of unit roots in the series of real effective exchange rates and in the series of FEERs. We find and estimate a cointegration relationship betweendoi:10.2139/ssrn.1933305 fatcat:et43mcvuczgxjiifyppoby4ypi