Australia and New Zealand Exchange Rates: A Quantitative Assessment
International Monetary Fund, Jan 1, 2009 - Business & Economics - 31 pages
The paper describes three empirical models commonly used to conduct exchange rate assessments and applies them to data for Australia and New Zealand. The baseline results using data and mediumterm projections available as of October 2008, suggest that the Australian and New Zealand dollars were broadly in line with fundamentals, but with a wide variation across models. A battery of sensitivity tests illustrate that altering the underlying assumptions can yield substantially different assessments. The results are particularly sensitive to the choice of assessment horizon, the set of economies included in the sample, medium-term forecasts, and the exchange rate reference period.
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Real Exchange Rate Developments
A Country Coverage and Econometric Methodology
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1.6 Equilibrium real 2013 projections 55 countries Age Dependency Australian dollar balance to GDP CGER methodology Country Coverage current account balance current account deficits current account norm dependency ratio effective exchange rate equilibrium current account Equilibrium real exchange ERER model exchange rate adjustment exchange rate assessments explanatory variables expressed in terms External Sustainability Approach fiscal balance Foreign Assets government consumption government net asset growth rate IMF staff estimates income per capita interest rate differentials intertemporal Macroeconomic Balance Approach medium-run equilibrium value medium-term NFA norm NFA position nominal effective exchange nontradables oil trade balance output per worker percent of GDP percent undervalued percentage point persistent deviations position to GDP positive association purchasing power real effective exchange real effective terms Real Exchange Rate Relative Productivity retirement age population Ricardian equivalence robustness tests sample Sensitivity Analysis Table terms of purchasing terms of trade tradables trading partners underlying current account Zealand dollar