This paper proposes a new approach to estimating equilibrium exchange rates for small open economies. We set up a simple structural model of output, the rate of inflation and the real exchange rate. These observed variables are explained by unobserved equilibrium rates as well as unobserved transitory components in output and the exchange rate. Using Canadian data over 1974-2008 we jointly esti...

A central problem ill empirical macroeconomics is to determine when and how much the exchange rate is misaligned. This paper clarifies and calculates the concept of’ the equilibrium real exchange rate, using a structural vector auto regression (VAR) model. By imposing long—run restrictions on a VAR model for Iran, lour structural shocks are identified: nominal demand, real demand, supply and oi...

Using a State-space model, this paper investigates the contribution of both observed and unobserved fundamentals to nominal exchange rate movement in Iran for the period 1991:2-2011:4. To this end, we follow Engel and West (2005) and Balke et al. (2013) and use an asset-pricing approach to develop a rational expectations present value exchange rate model. In order to examine the role of fun...

Microfoundations are provided for a common model of balance of payments crises by showing formal equivalence to a standard overlapping generations model. Certain domestic policy rules are inconsistent with fixed exchange rate equilibrium, which is in agreement with previous results. However, when policy is consistent with a fixed exchange rate equilibrium (1) there are multiple stationary equil...

This paper estimates the equilibrium real effective exchange rate and determine level of misalignment in Sierra Leone, for period 1980 to 2018. The utilizes behavioral methodology within Johansen maximum likelihood framework estimate long run rate. unit root test result shows that all variables are integrated order one, whilst cointegration establishes existence one cointegrating vector as evid...

in this paper, based on a new keynesian structure, we have analyzed monetary policy response to exchange rate volatilities in iran. for this purpose, first, exchange rate derived from equilibrium condition in exchange market and then two different models have been estimated. assumption on the first model is that central bank responses to exchange rate volatilities and the assumption on the seco...