Equilibrium real exchange rates: closed-form theoretical solutions and some empirical evidence

Article Abstract:

A two-country stochastic model, inspired by the Lucas (1978) principle, presents closed-form theoretical solutions for evaluating the relationships of wealth, relative per capita consumption and real exchange rates in countries. These solutions are obtained from a detailed analysis of the correlation between real exchange rate and consumption expenditures under intratemporal and intertemporal equilibrium conditions. Results suggest that the United States has a lower time preference rate compared with other industrialized nations. The analysis also confirmed the existence of persistent deviations in purchasing power parity.

Economics, Research and Development in the Social Sciences and Humanities, Analysis, Industrialized countries, Gross domestic product, Industrial nations, Wealth

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Real exchange rates under the gold standard: can they be explained by the trend break model?

Article Abstract:

The possibility of using real exchange rates under the gold standard as a stationary model in a broken trend is studied. The unit root null for 14 exchange rates used by Diebold, Husted and Rush (DHR) is rejected under the conventional unit root and sequential trend break tests. Results of the study complement the fractional integration evidence made by DHR which show long memory but mean reverting behavior in real exchange rates.

Gold standard

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Exchange rates, interest rates and current account news: some evidence from Australia

Article Abstract:

The impact of Australian current account news on exchange rates and interest rates is studied from Jul. 1985 to Dec. 1992. Findings show that the announcement of an extraordinarily large current account deficit caused the depreciation of the Australian dollar and an increase in interest rates. Major structural breaks were recorded. News after Jan. 1990 neither affected interest rates nor exchange rates.

Australia, Interest rates

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