A Two-Country Natrex Model for the Euro/Dollar: Theoretical Approach

CIDEI Working Paper No. 76

30 Pages Posted: 8 Feb 2012

See all articles by Marianna Belloc

Marianna Belloc

Sapienza University of Rome - Department of Economics

Daniela Federici

University of Cassino and Southern Lazio

Date Written: April 1, 2007

Abstract

This paper develops a NATREX (NATural Real EXchange rate) model for two large economies, the Eurozone and the United States. The NATREX approach has already been adopted to explain the medium-long term dynamics of the real exchange rate in a number of industrial countries. So far, however, it has been applied to a one-country framework where the rest of the world is treated as given. In this paper, we build a NATREX model where the two economies are fully specified and allowed to interact. Our theoretical model offers the basis to empirical estimation of the euro/dollar equilibrium exchange rate that will be carried out in future research.

Suggested Citation

Belloc, Marianna and Federici, Daniela, A Two-Country Natrex Model for the Euro/Dollar: Theoretical Approach (April 1, 2007). CIDEI Working Paper No. 76, Available at SSRN: https://ssrn.com/abstract=2001108 or http://dx.doi.org/10.2139/ssrn.2001108

Marianna Belloc (Contact Author)

Sapienza University of Rome - Department of Economics ( email )

Via del Castro Laurenziano 9
Rome, 00161
Italy

Daniela Federici

University of Cassino and Southern Lazio ( email )

Via S. Angelo
Cassino, 03043
Italy

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