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A simple model and its application in currency valuation

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  • Zhang, Zhibai

Abstract

A simple currency valuation model is given. The model is based on the Penn effect but reduces the uncertainty of the econometric specification that the Penn effect and many other models have. We use the model to valuate eleven main currencies’ bilateral real exchange rate against the US dollar from 1980 to 2010. In the model finding, a seeming convergence phenomenon is found.

Suggested Citation

  • Zhang, Zhibai, 2012. "A simple model and its application in currency valuation," MPRA Paper 40650, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40650
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    References listed on IDEAS

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    More about this item

    Keywords

    Equilibrium exchange rate; Absolute purchasing power parity; Penn effect; Chinese renminbi;
    All these keywords.

    JEL classification:

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

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