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Od parity kupní síly k natrexu - případ české koruny
[From PPP to Natrex - the Case of Czech Crown]

Author

Listed:
  • Jiří Škop
  • Jan Vejmělek

Abstract

The exchange rate cannot significantly diverge from a (real) long-term equilibrium level consistent with the macroeconomic picture of an economy for a long period of time; otherwise, the economy suffers from macroeconomic imbalances such as below-potential growth and below natural employment, or on the other hand faces overheating of the economy with rising inflation. The paper focuses on different methods of how to measure the long-term equilibrium exchange rate. After a brief discussion of different approaches, the NATREX one was theoretically developed for the case of an open economy and empirically validated for the Czech economy. The NATREX concept represents a macroeconomic model based on stock-flow interaction. After the estimation of the NATREX model for the CZK, we have been able to answer such questions as: What are the pace and main determinants of the current long-term equilibrium appreciation? What is the current value of the equilibrium exchange rate and the misalignment of the current exchange rate? And, how fast is the exchange rate likely to revert to its equilibrium value?

Suggested Citation

  • Jiří Škop & Jan Vejmělek, 2009. "Od parity kupní síly k natrexu - případ české koruny [From PPP to Natrex - the Case of Czech Crown]," Politická ekonomie, Prague University of Economics and Business, vol. 2009(3), pages 323-343.
    • Handle: RePEc:prg:jnlpol:v:2009:y:2009:i:3:id:687:p:323-343
    DOI: 10.18267/j.polek.687
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    References listed on IDEAS

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    More about this item

    Keywords

    Equilibrium exchange rate; exchange rate misalignments; purchasing power parity (PPP); natural real exchange rate (NATREX); half-life convergence; Granger-Engle cointegration analysis and Johansen method;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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