equilibrium exchange rate in a developing economy - bleda hasa
TRANSCRIPT
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Equilibrium ExchangEratE in a DEvEloping
Economy
04(3
5)2012
bed hd*
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contEntS
Abstract 5
1. Introduction 7
2. Theoretical background and applications 8
3. Data and Methodology 16
4. Tests and Empirical Results 22
5. Conclusions 31
Bibliography 32
Appendix l 36
Appendix ll. Data Description & Sources 38
Appendix lll. Box on BS effect 40
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abStract1
This research attempts modelling equilibrium real exchange ratefor Albanian currency. For high-growth economies, factors likeBalassa-Samuelson effect and terms of trade, referring to internaland external equilibrium in an economy, play a substantial role inguiding equilibrium RER. This research relies on a BEER approach tomodel a long-run relationship between RER, a Balassa-Samuelsonterm, terms of trade and net foreign assets, as well as real interestrate differential, sticking to few variables considering that the sampleof 13 years is critically small for the method used. BehaviouralEquilibrium Exchange Rate (BEER) approach is a statistical modelthat offers a feasible alternative to equilibrium exchange rate,
though at the disadvantage of lacking the macroeconomic balancenormative. Findings suggest that terms of trade and relative priceshave the greatest impact to relatively affect real exchange rate,while real interest rate differential and net foreign assets have onlya marginal effect. Also, it is real exchange rate and relative priceratio that adjust to restore equilibrium, once the system is subjectto a shock.
Key words: Equilibrium exchange rate, BEER, Balassa-Samuelson,cointegration1 a s d e es f s wk ws we s ess f f mS Es d Fe D ues, uK.
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1. introDuction
tee s e w ed z e f e. S dd e s fe ess k ss e ess ee ewse.
az ee e s e ee s w, s ese ees f e s we s e ef f e. te de fds f ee edee s ee ed csses (1928) e ps pwe p (ee ppp). We e f ppps ee kw ess, ws w d dw ee fewk f ee e de, s es ss es sd e e we eessed see.
Se ee e ees e d e de f e e ee e ws se. m e fee ees e sed f f e es esed e ess fs e eks
f ee e. Se e, ee sd fewkse ee se e ee e, s sed e esee. iee f d see sessf e de f s fd s edeed ese des d f. ye, zd e f e f fe e, eds eefs f se e ee e ewse.
te s sd s ee ee fs ffeee e s e d e eee d e sss. te f be E Ee re ezes e ef ee ee f dee ees, e s eeffe d es f de, we s e fee esf d eees w s e s ses. te wkeeds s fws. Se ii des w e ee fewkd s f s . Se iii es d ded sses. E ess d ee eszed Se iv. te f se des.
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2. thEorEtical bacKgrounD anDapplicationS
2.1 litEraturE rEviEW
tee s de ss e w f e e, eee ppp ess, es ds fee ded es. ad, e () ee e ewee wes sd e e f e e ees e e. a e e f ppp e s e lw f oe pe (loop)2.
me-ee ppp (ess ese) ezes deee e f s ss, ees e dffees, ees,d e fs w f e ee eee e.
i s ss f ppp d f es e e de. is fs e ee ede de d sese e f s fe. D sees 700es e f ded ewee hd d Edsw f des f w f e e s se(F, K, & rff, 1995). os s fs d e e fe f ppp (rff, 1996). oe fs sde ed we ppp s dsssed.
ts ss d f e e wede es. tffs d -ff es s we e esf e se ds seed w dffee es. Ee d
res (1995) zed (dseed) cpi f 23 es ed uS d cd, d e ee e f e se dewee w es ws f f dse ewee e. tede effe d ee dd dddse w 2,500-23,000 es ewee w es e se sde f e de.
aee, fe f ppp s ee ed
sk es. Ds (1976) es de swed w
2 ase ppp d loop e e e se, ppp e ed e ee es, we loop s e f e e.
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e d f sk es e de f eee dee d e e dees f ppp. De sk es e ds ke e ppp d e . Sdes e e s be-Wds ed w fee es fsed e des. Feke (1978) fds f ppp ef d. b ee wef wee es e wd see es e,sk es e f ess eee f ppp ess. Dese e sess, sdes d f e se eesejeed ppp (Feke, 1981) (K, 1978). meese & rff(1983) swed -f-se fess f e des
fed w ppp d d, ef d wk. Ee 15ee es f de f e ee e ed ed sess f e e-ee ppp(Fke & rse, 1995).
i s fs e ee e, rff (1996) swed ee e eds, ppp ee dd d se ses dd, k e wf e d s. he sesed
es ee sf dfs e ppp e, e bss-Ses (ee b-S) effe, eds e d sed e. We f e ew e ee, e eee es w e ded sde effe s b-Seffe.
balaSSa SamuElSon hypothESiS.
te e f e fs dee e -e eee e d eeed es e ee ee.te s f e dees s e bss-Seseffe, ee ded ee bss(1964) d Ses (1964)3. ude e sss, eb-S effe es e ee fse w f es e-ded ds se es w ee e ew dee ees, ded we ezss e ses ds, w se e ee e e.
3 aed iii, f e s
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te ee s ee eed w d e f es z ee e. te s eese fewk,e fde de (FEER) des jde eesse sse ee d ses ied Ee be (Ws, 1983), (We-lews, 1992).isd d Fe (1998) de de es e - e s-ese (S-i)s, we Se (1994) ses e efeee d sk dss ewee e S-i s f dffee es.
Ee e des eed e ee se ppp e
s d k. te se f fde s e sese d ees ee d sffe d e d ee se w f deeees e e. a ss deee e ezes e e f e fss e e e ee e (BEER). i s ede f es ffe e d d s s s sdeed sk-fw sse
de (ck & mDd, 1999), (Wdw, 1999). We kes e uip d b-S effe, bEEr ks ede ss f e e (s FEER).i s sd i sed BEER de sse f E/lek e ee e f a.
2.2 moDElling ExchangE ratE (bEEr)
te bEEr de fws e sdd f ck dmDd (1999). te s s e uip k s e (4.1), we e es djsed w sk f4:
qet+k
= - (rt- r
t*) +
t(2.1)
wee rEr s fe e e e f e e.
E (4.1) e ewe s rEr:
qt= qe
t+k+ (r
t- r
t*) -
t(2.2)
4 bEEr s ee ed re Effee Ee re.
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s ,
t
= + t
+ t
(2.3)
wee ts e-ze d e d
ts e
e f sk e. i ee e se s sef f e f des fe de.
(2.4)
te e qet+k e sdeed s - sse
e f rEr ( ) ss ees. i efe eessed s f f see es ee eedw sk-fw de.
qt= f(tot
t,tnt
t,nfa
t) (2.5)
F, rEr e s eessed s f:
qt= f(rt- rt*
), tott,tntt,nfat,t) (2.6)
wee s es f de d eses e eeess fe e, s ee e f ded -ded ds s ese f bss-Ses effe. pded e eee d e es e i(1), e es wd eef e e fe. ms , deees s eeed i(1) de fse e w ewd w e, d s s e ee e.
2.3 applicationS
a e des dffee es kes e jee f e esee d sefs.ojees, ese, sde fd e ek w e esee, e
e esee es e f ee e ee e.
_
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bEEr des ee e e f e w ddes e se effes. Edw (1994) des- e, s es f de, ese f eess,e fws, e ee sed d e we. Wdw (1999) dfes bEEr w ee e, f eeed e , e s sdeeffes s w ee ke FDi e e. te eseef e e bS-effe s e ezed e bEErde, s s ed dffee es edes (mDd, 2000).tee s ee f efde des ded es ke FEER, natrEx, iEb,
s ese des e ee sed f d.
applicationS in DEvEloping countriES
mde e ee e ppp fewk s ees s e ed de sefs eed se es. bess e. . (2003) d Ee e. . (2005)se es ee ses ee e bss-Sesfewk f ee e.
Fs, e fe f ppp ee e de se esfs e b-S effe, ke e esee f s s ss, de (he & Wsz, 1997)d de f dffee (bess, Fz, & x,2003)) ed e eds eed b-S effe fde eded sdd e. te e ewee d e ee e seed f e
ed s eeed s edee e ee e ede se des e e rEr ees (mss,1986), (Ee c., 1993)5.
i dd, b-S fewk e eeded e e e fded fs ee e f -des. a de weeee e dee e dfed dd w- , sesed bw (1984), ded
sde fs ke ee s w e s effes.5 Eese ee d e edee ess f e fe f ppp e dese s we. add fs e eed e s d e eds.
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i ess ss e e e es f dedf -de ds, eses dsse e e d s s f -de ds se es . lee e. . (2008) fds s edee e sdf s ees cEE ees.
Fee, ee dsses ewee e b-S effe db-bwe effe (b & bwe, 1965). We e effes s, e e f eed (dseed) es ffes rErf ess eed djses w ke es. Ee wde ees, see f b-S effe, e cpi
se f sees e des sf ed effes cpi-sed e ee e. te se f eed es cpi ske es f 10% 46 % cEE d e 90es (Eee. . (2005)). n ez d de w se ddfs de s (ese) b-S effe.
te se f e f e fde es s e wk f bEEr (see te i.1, 37). i des w e
d e e s e sf e f def es f ke e s ees. leee. . (2008) se de ess de s d e e e e des es efe deez k e. Sfe f e de/-deee e effe s ee deed s deeees, ess e ss e (te 2. 1).
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te 2.1 S f fds f - effes s es
d e f _dff fd Ecmef-
fe
1/2 fe( -
es)
S'75-98
ae (2003) -0.42 -0.31 --
czemeek & K-ek (2008)
-2.17 0.0256 0.1692 -0.1033 3.89
pdrwdwz(2003)
-1.32 -2.221 -1.028 --
Es Fz (2000) 0.443* 1.422 0.778* --
Es hss (2005) 1.71 7.578 --
l
as-g
(2002) --
l ve (2002) -1.91 1.22 0.005 -0.461 1.08
pedEEc &b
De bekd Sk(2001)
(-0.4) - (-0.7)-0.6(.
F e
(2006)
Ecmef-
fe
ed1/2 fe
( -es)
cze -3.03 -0.84959 -0.08703 -0.44 1.1
h -2.25 -0.30 -0.64 0.8
pd -0.79 0.61 -0.48 1.0
Sk -1.18 -0.28 2.1
Se -0.21 -0.66 0.8
te ee f wde e f es sed edes, ee f e ess f e esee es, fe dffee es eeees w ees e kee de, , ee e ke, kes swe s ds ke. te e f es df ppp,d ss e sfe, s ded ese keefes d d ffe ee e edffee. teefe, e wde e f eses f b-S effe de s djse effe f rEr e e de se -sefs de s sesf d ss e sdes. ce, des w e dfd e sf ess, ss de ee f
ss-se f. te e s e s f ese es. as ezed e e f e d esf ess, edee e de fd
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e sees d (b d mDd (1999), mDd(1995)). te de f e sees sdes s e we sef es.
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3. Data anD mEthoDology
3.1 Data conStruction
Sees f s sd e ee ed f w s es e ee e see f d6. F eee e, e e ese s ee sed, ed def ee e eessed s fe ee f e e (E/lek), e f dffeeewee e d E e.
tde / -de (tnt) s e dffeee f ede / -de e ee E e s e b-S effe7. tes f de s e f e ede e de eses. D sed e bk f a. ne fe sses (nfa) f e k sses se f gDp e sed s f f f e e. reees e dffee (r-r*) s esed e 1 e es f a d e ed f 1-e E, defed esee cpi. rsk e. te f de s sef gDp ee f E e s eeed e e ske effe e ee e. We se d k 1995, es e e s f 1998 d eed fs e f 2011 (see aed ii. D Des)8.
6 m ses e www.kf. d www.s...7
te dsde f s ese s des dss f effe dedsde fs.8 Ses: bk f a wese, ise f Sss f a, Es. Sesees e e sed f sef se ese wk d e e.
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Graph 1. Inspection of main variables
-.2
-.1
.0
.1
.2
.3
.4
1998 2000 2002 2004 2006 2008 2010
-5.2
-5.1
-5.0
-4.9
-4.8
-4.7
1998 2000 2002 2004 2006 2008 2010
Real exchange rate (log of) foreigncurrency/ unit of home currency
Relative price index: T/NT (home)-PPI/HCPI (euro land)
Export Price index over Import Priceindex ratio (at home)
Public debt (home)/public debt(euro area)
NFA of banking system home
Real Interest rate differential(home - foreign)
.00
.04
.08
.12
.16
.20
1998 2000 2002 2004 2006 2008 2010
.18
.20
.22
.24
.26
.28
.30
.32
.34
1998 2000 2002 2004 2006 2008 2010
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1998 2000 2002 2004 2006 2008 2010
.65
.70
.75
.80
.85
.90
1998 2000 2002 2004 2006 2008 2010
Graph 2. Price indices
85
90
95
100
105
110
115
120
98 99 00 01 02 03 04 05 06 07 08 09 10
HICP in Euro area
PPI in Euro area
70
80
90
100
110
120
98 99 00 01 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 10
Tradables price index - AlbaniaNontradables price index-Albania
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3.2 mEthoDology
3.2.1 Data propErtiESEe ss es es f ess s
sse w ee eds.t se e deees f e esses eee e sees es d s ese f sd es f e f es. te s sef d ef ef e f e e d f esee s se f e-ees, w f ss esee s
e e f s.
i es/fe fw es e s s wesk es e fe -e ee. ye, s s fd e es e s e sed -s e. as ee, f -s f see ks se ed d 1970-1990, f ed ded es,
s s f e se ed s eeded 100es. as Jses (2006) , s e s e ss e f e e. F ss f ew,s ds e ee ed d e efef e ss. besdes ee ees sejdes, f es e efed deee s.
Def. a ss ess s defed s (wek) sess f ssfes ee ees, () s e, ()s fe e d () s e sse1. Ss,
() E[yt] = s f t,() v [yt] = s f t,() c [y
t,y
t+n] = s f t,
1 (Harris & Sollis, 2003).
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te es sss eess e fsdffeee f e sees e esed s fws:
yt=ay
t-1+ xd +
1y
t-1+...+
qy
t-q+e
t
wee, x eeses s s d ed, d =-1, we d ee ess e: H0: = 0 dh: < 0. te ed es f e (y
t-q)
e dded
f se e f e esds ese e e e wese. r e es w se ed es s d f ar(1) ess.
te es es f s e e s Sdes-ds es e ee wked Dke &Fe (1979) d e eed mK (1991) (1996),ee e es e aeed Dke Fe (aDF)9.
3.2.2 cointEgration & JohanSEn approach
te ee wee -s es ee ed s ess ws ed e
ge (1981) w sed e e de -e es. Ee d ge (1987) j deeed
9 Sdd ess sed Eews 6.0.
csde se d-ee ess (d..), eyt eeed fs de -eesse (ar) ess:
yt= p y
t-1+ ~N(0,2)
e e e fytdeeds e es eds e
yt -1
s dse e ses t d es f ds w 0 e d se 2, .e. de d deede dsed (ee..d). te ey
t
w e s f s (p) < 1; k s (p)= 1, y
ts s2.
2 We s (p) > 1,yt s s d ese .
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ss e f es f e d esees f e sses w e. te esed e ess e esed e es ewee i(1)es s e es w s es eeess, s e ee f e w -s es d lS. os, sze d we f- ess es e f sess f eess. te fd f ceed-var s e gereese tee10.
besdes Ee d ge ed, Jse (1988) (1991)
ded sed ee f eeesee, wds wde ed de - ees se s e. te Jse ve E cemes (ee vEcm) eese ds Ee dge we:
Zi,t=
t-j* Z
i,t-1+* Z
i,t-1+d
i,t+
i,t
wee,Zi,t s e e f e N edes es e sse, s f s e effes (N x N) d eess,
i,t-js e f effes f e N es ees
e eed, w s d f seeds f djses(s) d - effes (s), s e f s effes f dees es e var de ee dffee f ze, d
i,ts e e f ..d es es
w e ze d fe e.
Jse es w ses f e e var (ee cvar), e es f ee (cv) d dee f e k (cr). Jsede se f lked r (lr) es ss, wse sds deeds e dees es e var de,w ses dee f cr d deeses, ke eee Jse . Sed, e deede ml es f, sed f e lS, deee ee se eded k eess.
10 See (1987; Ee & ge, 1987) f s f f ge reesetee.
j=1
4
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a f Jse a, e -s f ees, ees :
Determining the unrestricted VAR, ensuring that i,te we
se. Testing for reduced rank of d ded s
f dees es. tes f e ses Zi s de s lr e es. i ess e ess ee e s ds cv s e ess:
LRTR
(r|k)= -T ln (1-i)
weeis e es eee f e . as
es e ded mK-h-mes(1999)11.
Testing for uniqueness of CV and for weak exogeneity.
a Jse ed w e es
f s ees s e. D d sed ffe es ess d ed sed eses. Weee s e swe s w ses e eeded fe s ess d sffe we vEcm s, sees f d e efeed ss dss eweedffee ess e sees des (Jses, 2006). Wee se s s s f f e e fses , s f e feess f e se.
Jse (2002) s deeed s se e, w e sf f dee s sees (50-70 ses).rese d a (1992 ) sfed f f s sees w dfes s es wd s f. Eews 6.0 ee ke ses esf mK-h-mes (1999).
11 c es f mhm sed Eews dffe f se eed Jse &Jses (1990).
i=r+1
k
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4. tEStS anD Empirical rESultS
4.1 Data propErtiES
i sed aeed Dke Fe tes (aDF) ek f s se e 1998- 2010. a e es wee sesdjsed. a see w Swz if ce (Sic)d 10 s ws se.
u ess sw e es ded s sd e
-s12. F es e ess f ws ejeed ees, fs dffeee. te eseef s ed dd e e ess f e aDF es.
a es e e-ee fs dffeee d w s, d f 4. We we dffeeses e e dffee ess, se sws essee sees (g 1. . 17).
4.2 Empirical rESultS4.2.1 thE var moDEl anD tEStS For rEDucED ranK oF
o d e e d esed var de f 5 s ws esed sde dd ess e f 3 4 f s f e es.Swz-ce d h-q es ses e f 1we e ess ses f 4 5.
resd e d es f esed-varw 1 fed f e fs , we fed de - f sk e (lambda) esds. tes w es es e e e fe (ess sw). varss sw ss feees e sese se-eed esds, esd skewess, ee s, e s kss d esde eseds13. Sze d
we f ese ess e ffeed se sze. W e 12 ms ds es ess sw de se s. te e e ees.13 (hed & Jses, 2000).
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e, e esed var wd s f e f e e esss e se swed. he s se deees f feed. i kesse ess d e ess ess ee. F s ses s sesed se fe deees f feed. i se e eed.
te ee ee f e BEER ee de s ee s es e (ed w f uip ds see)- es ewee RER d e fde (-s) es ed BEER, efeed s e.Determination of rank of matrix and of number of deterministic
es Jse ed s de ses. cees ess ses 1 e e deede fdees es.
We e ess ses de 4, ess f ees sesed eds e es, ss.Jses (2006) sess se 2 s e e sefded ee e e eds e d, ess cvs
e ssed e ze e (ses se 1), w s e se. u ess swed sees e s.i se eed w ee e e e( ed), ee e s e ds. cee k des e e ee e ef ee es sesed e de (Jses,2006). a e ee de wd ses w ees, e f e uip w sk e, d e e fe ppp eed w b-S e d e fdes.
4.2.2 EStimation anD iDEntiFication
i sk e e e ss uip s w de e ees w s e ed d eed s se. ts s e sed e -effe f -0.548 ee e rEr f 1 ee e e ees e dffee. a e - e effes
e sf s jded Sdes -ds, -effes ssf e s d (te 4. 1). Ds esssw esd e, e, d -e ejeed, we fed es f esd eeseds.
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Table 4.1. Eigenvector decomposition of (unrestricted) long-run matrix
rEr rr_DiFF nFa/gDp tnt tot lambDa conStant
l reeffes.
1 -0.5484 0.3148 1.2398 -0.5257 -0.528715 5.6488
[-4.02391]* [ 1.33567] [ 19.1758]* [-9.66391]* [-4.98103]*
adjseeffes
-0.367282 0.11623 -0.005659 -0.25886 0.276248 -0.021861
[-2.47995]* [ 1.03814] [-0.10526] [-2.74134]* [ 1.00944] [-0.15600]
* -ss se kes
(i) ress ee-e
lked r (lr) es sss ejeed ss f e fdds e nfa sfe f e es e.
Tabela 4.2. Restrictions on long-run coefficients: teses
(1,k)=0e=0 _dff =0 f/d d
c-se(1) [ 12.658* ] [ 10.272*] [1.6489] [ 17.417*] [19.015*] [14.547*]
(*) es sfe 5 %
(i) l-r wek eee
Wek eee ess s esed w lr es ede(Jse S. , 1995). te ess ee s ef ees s feed e ss f e ees e sse, we s ses feed e.
Table 4.3. Testing for weak exogeneity
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: teses(k,1)=0
d(e) 2(1) d(_dff)
2(1) d(f)
2(1) d()
2(1) d()
2(1) d(d)
2(1)
(c-se(1) 5.172471 0.979017 0.014521 6.400073 0.20597 0.025266
c ve(95 %)
{ 3.841 } { 3.841 } { 3.841 } { 3.841 } { 3.841 } { 3.841 }
idd lr ess w ds f wek eee
f 4 es e esed vEc de (te 4. 3). Jess fed e -sfe, e d ee
de/-de e s djs ewe sse s esed sk14.
Table 4.4 Joint test restriction on exogeneity and structural restrictions 2(4)es - effes 2(5) es - effes df f
J2(df) es [ 1.5036 ] [ 3.6742 ]
2(df) { 9.488} { 11.070 }
te - e effes f fdes ee sed esed cvar, we f sk es . a ese -de e de e, s dee wd e ese (e) f rEr, eeee e. te sze f 1.16 ee e f 1 ee ese -de es s ee e
e ese f d 0.4-0.7 f De bek d Sk (2001), we e e f e dd e sees fds Ese Ee ees (te 2. 1, .14). as, es f des se sed. a 10 % ese e es wd e 4.8 % e ese e.
14 a e s es esed-vEc sw eee f d, f dd.
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Table 4.5. Eigen vector decomposition of long-run matrix
l r e effes (e s); -sss kesrEr rr_Df nFa / gDp tnt tot d s
1.00 -0.451 0.319 1.160 -0.470 -0.497 5.572
[-3.62325] [ 1.48281] [ 19.6583] [-9.45884] [-5.13270]
adjse seed effes (-effes); -sss kesrEr rr_Df nFa / gDp tnt tot d-0.46691 - - -0.31273 - -[-3.04410] na na [-3.02576] na na
uip sess e des e s eeed deeewe e des ees e eeeds e fe ees e.hee, eed e e t0, we ees edffee s se, s e w e ee f dee fe de. S, f e sess se es e ded f e ew e e ees e. ye e sze f e effe s es, 0.45 ee e rEr f ee 1 eeese e ees e dffee.
re ee e es se ee effef 0.5 ee de, w e w s. ae sk e sd eeed e ssed w edeeed e. pse s f ee de s see , w ss es sk e sedee. oe sse e f e se s s
ee de e d f e des w, w s ese eed sk e. ts s e (see) sk e dees, e (see)des w es . S, rErees de we sk e. as s, k 1998, des de ws 38 % we a d jsed s e f 1997. i e 2000, we e d szed d sk e sd e deed,
de a eed d 61 %. tse fes d sk e ws e e 2000 1998, 1998 se dd eed w, e
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e se w d e fe 2000 s sk d deed.
te ew s e ee de s ese eed ske sef, d s s rEr. t kes e edeese e se eed ee de.
4.3 Economic intErprEtation
a s s e w e fB-S effe e
s. te ee e (tnt) s es eB-S effe de ee d eses s we s dedsde esses. te e e eed e e f eedes -de e de. aee, sew f ees e 10-14 % f gDp ww-sded e e w (ee eed) d .
use f ee d ese wd e de sse dffeee e b-S effes f ded sde effe f sed, e d ee e e ds sd d f ee s eed se,d d s se e d ee15.
a s se, e fds ses w edes es djs e, rer d tnt. tee e wses e ee ee. te -effe frers
e ( 0.46), f fe ess w es, e fs djse es. a ee e fs djse seed s e ed e s ss e, e d e e. We s ssed e de/-de ee e (tnt) djss e ee sse w e e ef e e des eess d s. re -e djss ss e e de es
e e e.
15 a e de ee d (gDp/ee ee E e)dd e sf ess ee we e es ded (ess sw).
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te djse effe e fed w s ee se, w ses e sed sse. te eee (tnt) s djse ee ( 0.3).
ass e ss ed f s e s ded fdes -de e de, e deded rErdse s eed k de djse f -dee de e e Er. F s ded d we wd ee -de es a e efee, s e es dw s we se edse . hee, e bss-Ses dse e sed ee e ees se. S
se wd d de e sss. Fs, e sse ees e ee e e s ee e we e des. b es, e eee d ee e (tnt), djs e w (ss)e ses.
4.3.1 conStructing an Equilibrium ExchangE ratE
i s sse s e e e eee (bEEr) s e e. i eed fd ee e f es, ee e. us
s e e e ee f e. cek e eedes e (tnt) s sse w s e.
tee s de ss es BEER, hpfeed e s f e edes e tnt d ee es e ssed sse w e
e. ts s w bEEr s ss e e ee e e. i s de se es. te bEEr ese s ew e d 1999-2001, e-e. te dee ke 2002 s es, we s ee se, e,e 2004- 2007q1 fwed e-e 2007-2008. te dee k e 2009 rEr se e ese (g 3).
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F e ses i sed hp feed e ee e(hp_rEr) s de-deed e f e eee (bEEr), s--s e ee e (rEr). We esze f e de-s eed fe ss, ee esed sees ed e ed.
4.3.2 problEmS With bEEr moDEl
te e-e es (Ecm) ses e e w efes e e f e ess d e ed f, we ee s ee e e s ee e se w es. i 1998, e ws e ess fee f e s- f 1997, we 2010e e w ws de s s ee16.
add, bEEr fes e e e se edee we deed f s ses ee e s eese e. ts s se eed e feessdeee f e se dsssed Jses (2006). W f-fe f 4 es, w s ee fd sdes. e (seed) e e-e ess w kee few es 13-es se. b, Jse
ezes cv we e es s se w see ()s e z e, s Ecm w e fed rEr
16 bk f a, (a re 2010).
Graph 3. BEER, HP filter of RER as of 2011, as of 2007 and actual RER
98 99 00 01 02 03 04 05 06 07 08 09 1098 99 00 01 02 03 04 05 06 07 08 09 100.006
0.006
0.007
0.007
0.008
0.008
0.009
BEER HP_RER2011 RER
0.006
0.006
0.007
0.007
0.008
0.008
0.009
BEER HP_RER2007 RER
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see es e e (g 4). ts ds esw e-ees ( e) f e ee e see sdeed e ee.
te se f e s f-fe e f ss f. b
djse-effes e e effe f e see, w s e e -de e de17. F 1% dee e (ee 1 % ese des -de es), e e ee e eses (ees) 1.16 %. if sk e e e ee kes e, e s ses sed e -de e de s ed djse e. tsse fs we w e ss f e fee -dees, w s s w e se, d ee e e, s e ke.
17 te f -de ds d sees cpi ske (a) s eed 60 %.
Graph 4. Cointegration graph for Restricted-CVAR
-.100
-.075
-.050
-.025
.000
.025
.050
.075
.100
98 99 00 01 02 03 04 05 06 07 08 09 10
Cointegrating relation 1
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5. concluSionS
ts sd ees e ee e a.mde f e ee e s ee es fewk f ps pwe p. be de(bEEr) s eed s ese s es ee wd ses d s wde sed e sees de fee e f dee es. te s dee e ee e dee s bss-Seseffe, ded-sde effes de sed e es efee w e fe d ed sed
eses. as e ee e d f b-S effe sw-s, we ed e sse w Jse ed e. S ses f d ffe e we d szef ess, ee sdd bEEr de w uip k d eee e es, de/-de e, es fde d e fe sses, ws eed. ies e fes ws ded s wd ed ee ek d sed eses de s se f 52 es.
oe - es ws fd. re ee e dee de/-de e (tnt), b-S e,wee e edes es djs esee 46 eed 33 ee ee e ese e. Esf rEr wds de/-de d es f des esee 1.16 d 0.47 ee esee, e es dee rEr. tee s e swe w e b-Seffe s s e e es ded-sde effe f e fs.
adjse seed f rEr e s e fs ee ee f-fe f 4 es fd ded es.oe sse e es f se f ee e, sed f ee d, e b-S effe de sed e s se. b ese ees e b-S effe d e djse seed f ef ee f ess. ts s e f e ese f s e, wee e fs e fe ess, ke dee, ed e d e
effe f dseed es. uess e esee f ese fss sef ezed e e d e se sed, e e e f e e ed ssess sd e eeed ef.
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appEnDixi.
Table1.1.
VariablesusedinExchang
eRatemodels
StuDy
StuDy
pro
D
gov
opEn
nFa
rirD
tot
inv
FD
pc(S)
rp
FDi
ae(2003)
-
-/+
2
as-ge.(2002)
-
+
2
aed
le-r
(1999)
-
-
+
-
-
5
bee.(1
999)
-
-
-
3
be(200
2)
-
-
-
-
4
bs(2002)
-
+
+
3
bsdtes(2003)
-
-
+
3
besse.
(2003)
-
+
3
ced
Jze(2001)
-
-
-
3
cde(199
9)
-
2
csjk(200
3)
-
-
-
-
-
-
+
6
Ds(2001
)
-
-
-/+
3
Debek
dSk(2001)
-
+
2
Dsk(2003)
-
-
2
edle-r
(2003)
-
1
edlzs(2003)
-
+
-
-/+
-
5
Fzz(200
0)
-
-
2
Fse(2002
)
-
-
-/+
+
4
FdK
ek(1999,
2001)
-
+
-
-
-
4
hed
Wsz(1997)
-
-
2
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hse
.(2005)
-
-
-
3
imF(1998)
-
+
-
+
4
Kzks(2000
)
-
+
2
KdKe(2002)
-
-
+
-
4
Kjkd
Zeeee
(1998)
-
1
lzsdte
(2002)
-
+
-
3
mDddWjk(2002)
-
-/+
-
-
4
m(2001)
-
-
-
+
4
r(2003)
-
-
3
rdeedre(2002)
-
-
2
rwdwz(2003)
-
-
-
3
rszek(20
03)
-
-
2
ve(2002)
-
+
+
3
nef
31
10
4
9
9
7
2
1
2
2
2
nef
0
2
7
3
3
2
1
3
0
0
0
tefsdes
31
12
11
11
10
9
3
3
2
2
2
ne:(-)
esefeeeef
eseeee.
proD=
d(
fkeeecpi/ppi,gDp/
,gDp/ee);g
ov=
ees(%
gD
p);opEn
=
s
fe
sds(%
fgDp);rirD=
e
ees
dffee(kefe
eesew
deese);tot
=
esfde(e
e
/e);inv=ese
(%gDp);FD=
fede(%fgDp);pc
=
es
(%f
gDp);rp
=
eed(dse
ed)esf
;FDi=
fedeese(%fgD
p);S=
ss(%fgFp).
Se:b
sed
e(2003),meekdKek(
2007)desdwdes.
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appEnDix ii.Data DEScription & SourcES
lrer f re Ee re: f E-lek eee (fe e e f des e) ed e f w e des, f a d E e.
a es ed sws e. D e ://www.kf./we/Ssk_hje_230_1.. cpi www.s... F e sees e isef Sss sd e ed.
tnt1 (al_tnt eu_tnt): de -de e fa ee e e.
a deese _ wd ee fse ese -de e de f des e. hee ee ss eeed. i se sdes e e s ese sed, s -de de , w ee f se es.
- al_TNT (de de e ) a. r fde e de -de e de. a ese fese w e des s w rese Dee ds e f s e se (ed 1998 q1 2011 q2).
tde d -de e des f a e e, ee des sed f e ses
e e ed fe 1998. Se ses e fed e eess w de dsed d.
- eu_TNT (de de e ) E e. rf ppi hcpi f e E e. b des e e Ecb wese. ped ss.://e.es.e.e.e//e//sss/se_dse
al_nfa: e fe sses f e k sse a. nefe sses f e k sse s f f f ee (esed s f gDp). ae
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ss e bk f a wese:://www.kf./we/Ssk_hje_230_1.?e=ee_e_se&e=ee&cs=16&ed_d=5
Lambda1 (sk e). r f de f a d de f e e.
_de: p de s se f gDp a. r f de (des d ee) s se f gDp. ae k f a wese e ss se 2000.te sees f de s eeded k 1998 s
d d eed s e e we f des de f s ed.
eu_gdebt: p de s se f gDp E e pde s se f gDp f E e e ess e 2000 :://e.es.e.e.e//e//sss/se_dse
a d ed f s wese e ee sed e d f e es 1998 d 1999 s eeds. te sees s ses djsed.
al_tot1: tes f tde te f e e de e de ( se e). te w des eee sed w bk f a f e se.
te se f d sed s sd s sed e
s e f e ses w e bk fa.
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appEnDix iii.box on bS EFFEct
Given RER between home and abroad. Real Exchange rate andRelative price of traded goods are:
(2.0)
(2.1)
where subscript T stands for tradable goods. By subtracting (2.0)
from (2.1), we can write RER as the sum of two countries relativeprice ( ) and the difference of relative prices across economyand the tradable sector observed in each country.
(2.2)
Given that the final price is a weighted average of the prices intwo sectors:
(2.3)
ss f d (2.2) we e:
(2.4)1
ude e sss2, , e ee e f -deds ed de ds (e d d), efeed
s e ee e, s:(2.5)
wee,Ai s e e f d eseeses, d s se f e e se (i=N,T).F s sse se ses e e se e dd. E (2.5) ss e ee e f -deds (.e. e ee e) ees w ee1 We , e (2.4) s dfed w e .2 ie d ss ses, e.
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fse d s e de se .
te effe s fe ed, e e e ses -de se. ts es es fse dw ewee de ds -de ds
e ee d, , se rEree.
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cip K bK t
bed hdE es f fes ew me c s- //hd bed- t:bk f a, 2012
-42 f; 15.3 23 .
b.iSbn: 978-99956-42-52-6.
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