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Is the Yen Undervalued?

Author

Listed:
  • Saang Joon Baak

    (Waseda University)

Abstract

This paper measures to what extent the real effective exchange rate of the Japanese yen is misaligned from its equilibrium value by estimating the equilibrium value using the behavioral equilibrium exchange rate (BEER) approach. The economic fundamentals such as the terms of trade, the relative price of non-traded to traded goods, and real interest rate differentials are employed to assess the equilibrium exchange rate. The estimation results using the quarterly data from 1990Q1 to 2014Q4 indicate that the actual exchange rate of the Japanese yen was substantially overvalued from 2008Q4 to 2012Q4. In contrast, it was not substantially misaligned from the equilibrium values from 2013Q1 to 2014Q4.

Suggested Citation

  • Saang Joon Baak, 2015. "Is the Yen Undervalued?," Discussion papers 1503e, ERINA - Economic Research Institute for Northeast Asia.
    • Handle: RePEc:eri:dpaper:1503e
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Japanese yen; misalignment; behavioral equilibrium exchange rate;
    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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