Australia and New Zealand Exchange Rates: A Quantitative AssessmentThe 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. |
Contents
Introduction | 3 |
Real Exchange Rate Developments | 4 |
The Empirical Models | 7 |
Copyright | |
14 other sections not shown
Common terms and phrases
2013 projections 55 countries Australia Australian dollar balance Equilibrium real balance to GDP Country Coverage current account balance current account deficits current account norm denotes dependency ratio effective exchange rate equilibrium current account Equilibrium real exchange ERER model exchange rate assessments exchange rate External explanatory variables External Sustainability Approach Fixed Effect Foreign Assets government net asset growth rate IMF staff estimates income per capita Initial Net Foreign interest rate differential intertemporal Macroeconomic Balance Approach Macroeconomic balance Equilibrium medium-run equilibrium value narrow panel NFA norm NFA position nominal effective exchange nontradables Oil Trade Balance Old Age Dependency percent of GDP position to GDP positive association purchasing power rate External sustainability real effective exchange real effective terms Real Exchange Rate reference period Relative Income Growth Relative Population Growth retirement age population Ricardian equivalence sample Sensitivity Analysis terms of purchasing terms of trade tradables trading partners underlying current account WEO forecasts Zealand dollar