Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81895
Authors: 
Lindblad, Hans
Sellin, Peter
Year of Publication: 
2006
Series/Report no.: 
Sveriges Riksbank Working Paper Series 193
Abstract: 
In this paper we simultaneously estimate the real exchange rates between the Swedish Krona, the US Dollar and the Euro. A prime candidate for explaining the exchange rate movements is relative potential output. Since this variable is unobservable, cyclical and potential output are estimated in an unobserved components framework together with a Phillips curve. Our empirical exchange rate results are in line with theory. Increases in relative potential output and the terms of trade strengthen the exchange rate, while a relative increase of the fraction of middle-aged people in the population and budget deficits depreciate the exchange rate. The estimates suggest that the recent deterioration of the relative budget situation for the US versus Europe is a prime candidate for explaining the USD/EUR exchange rate change lately.
Subjects: 
equilibrium real exchange rate
expectations augmented Phillips curve
unobserved-components model
JEL: 
C32
E31
F31
F41
Document Type: 
Working Paper

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