Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective

40 Pages Posted: 15 Feb 2006

See all articles by Hamid Faruqee

Hamid Faruqee

International Monetary Fund (IMF) - Research Department

Date Written: August 1994

Abstract

This paper examines the long-run determinants of the real exchange rate from a stock-flow perspective. The empirical analysis estimates a long-run relationship between the real exchange rate, net foreign assets and other factors affecting trade flows. Using postwar data for the United States and Japan, cointegration analysis supports the finding that the structural factors underlying each country`s net trade and net foreign asset positions determine the long-run path for the real value of the dollar and the yen. The empirical analysis also provides estimates for the underlying stochastic trend in each real exchange rate series.

JEL Classification: F31, F41

Suggested Citation

Faruqee, Hamid, Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective (August 1994). IMF Working Paper No. 94/90, Available at SSRN: https://ssrn.com/abstract=883826

Hamid Faruqee (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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