Estimating an Equilibrium Exchange Rate for the Argentine Peso
This paper assesses the equilibrium value of the Argentine peso exchange rate based on the country's economic fundamentals and compares it with the official exchange rate value. The paper estimates a behavioral equilibrium exchange rate model...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/05/26401101/estimating-equilibrium-exchange-rate-argentine-peso http://hdl.handle.net/10986/24523 |
| Summary: | This paper assesses the equilibrium
value of the Argentine peso exchange rate based on the
country's economic fundamentals and compares it with
the official exchange rate value. The paper estimates a
behavioral equilibrium exchange rate model that allows for
movements in the equilibrium real effective exchange rate
based on changing economic fundamentals, using monthly data
from 1980 to 2015. The analysis identifies four key
fundamentals driving the equilibrium exchange rate in
Argentina: terms of trade, productivity differentials,
foreign currency reserves, and trade openness. Based on
these fundamentals, before the exchange rate reunification
that took place at the end of 2015, the Argentine peso was
overvalued by 39 percent. The results are robust to
alternative estimation approaches. |
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