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Internal and External Exchange Rate Equilibrium in a Cointegration Framework. An Application to the Spanish Peseta

Author

Listed:
  • Enrique Alberola
  • Humberto López

Abstract

A simple method to estimate multilateral equilibrium real exchange rates in a cointegration framework is used to compute the equilibrium real exchange rate for the peseta. The stock of foreign assets and the evolution of sectoral prices have been considered to be the fundamentals for the real exchange rate. After testing for cointegration among the three variables, we proceed to decompose the series in a permanent and a transitory component, following the method devised by Gonzalo and Granger.

Suggested Citation

  • Enrique Alberola & Humberto López, 1999. "Internal and External Exchange Rate Equilibrium in a Cointegration Framework. An Application to the Spanish Peseta," Working Papers 9916, Banco de España.
    • Handle: RePEc:bde:wpaper:9916
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    Citations

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    Cited by:

    1. Hugo Oliveros & Carlos Huertas, 2002. "Desequilibrios Nominales y Reales del Tipo de Cambio en Colombia," Borradores de Economia 220, Banco de la Republica de Colombia.
    2. Joof, Foday & Touray, Sheriff, 2021. "The Impact of Remittance Flow on Real Effective Exchange Rate: Empirical Evidence from The Gambia," MPRA Paper 106045, University Library of Munich, Germany.
    3. Alberola, Enrique & Lopez, Humberto & Serven, Luis, 2004. "Tango with the Gringo: the hard peg and real misalignment in Argentina," Policy Research Working Paper Series 3322, The World Bank.
    4. Pilbeam, K. & Litsions, I., 2015. "The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate," Working Papers 15/19, Department of Economics, City University London.
    5. Lopez, Humberto & Molina, Luis & Bussolo, Maurizio, 2007. "Remittances and the real exchange rate," Policy Research Working Paper Series 4213, The World Bank.
    6. Gabriel Gomes, 2016. "On the impact of dollar movements on oil currencies," EconomiX Working Papers 2016-1, University of Paris Nanterre, EconomiX.
    7. Ms. Susana Garcia Cervero & J. Humberto Lopez & Mr. Enrique Alberola Ila & Mr. Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates: Euro, Dollar, “Ins,” “Outs,” and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 1999/175, International Monetary Fund.
    8. Hugo Oliveros C. & Carlos Huertas C., 2003. "Desequilibrios nominales y reales del tipo de cambio en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 21(43), pages 32-65, June.
    9. repec:ath:journl:tome:30:v:2:y:2013:i:30:p:101-110 is not listed on IDEAS
    10. Garcimartin, Carlos & Kvedaras, Virmantas & Rivas, Luis, 2016. "Business cycles in a balance-of-payments constrained growth framework," Economic Modelling, Elsevier, vol. 57(C), pages 120-132.
    11. I. Paya & A. Duarte & K. Holden, 2003. "On the equilibrium value of the peseta," Applied Financial Economics, Taylor & Francis Journals, vol. 13(5), pages 317-335.
    12. Alper, Ahmet Murat & Civcir, İrfan, 2012. "Can overvaluation prelude to crisis and harm growth in Turkey," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 112-131.
    13. Kubota, Megumi, 2013. "Estimating the half-life of theoretically founded real exchange rate misalignments," Policy Research Working Paper Series 6411, The World Bank.
    14. repec:bdr:ensayo:v::y:2003:i:43:p:32-65 is not listed on IDEAS
    15. César Calderón M., 2004. "An Analysis of the Behavior of the Real Exchange Rate in Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(1), pages 5-30, April.
    16. Megumi Kubota, "undated". "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.

    More about this item

    Keywords

    EXCHANGE RATE ; ECONOMIC EQUILIBRIUM ; ECONOMIC MODELS;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • 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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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