DP323 Fundamental Equilibrium Exchange Rates for the G7
| Author(s): | Ray Barrell, Simon Wren-Lewis |
| Publication Date: | June 1989 |
| Keyword(s): | Capital Flows, Current Account, Exchange Rates |
| JEL(s): | 411, 431 |
| Programme Areas: | International Macroeconomics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=323 |
The Fundamental Equilibrium Exchange Rate (FEER) is the real exchange rate which produces a current account that is exactly matched by equilibrium medium-term capital flows. This paper sets out a small model to calculate FEERs for the G7 from 1971 to 1988. This model's parameters are either directly estimated or derived from the long-run properties of a larger world econometric model, GEM. Particular attention is paid to feedbacks from the FEER to the NAIRU, and interactions between world output, trade and commodity prices.