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Article: DP2004/07: a model of Equilibrium Exchange Rates for the New Zealand and Australian dollar.(Reserve Bank Discussion Papers)(Brief Article)
- Article from:
- The Reserve Bank of New Zealand Bulletin
- Article date:
- September 1, 2004
- Author:
CopyrightCOPYRIGHT 2004 Reserve Bank of New Zealand. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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This paper extends the 'Five Area Bilateral Equilibrium Exchange Rate' (FABEER) model used in Wren-Lewis (2003) to include New Zealand and Australia. This model calculates medium term exchange rates conditional on assumptions for 'sustainable' current accounts. The model suggests that the equilibrium value of both currencies has been declining over the last ten years. On the assumption of a 4 per cent sustainable New Zealand and Australian current account deficit to GDP ratio, ...