Munich Personal RePEc Archive

A Two-Country NATREX Model for the Euro/Dollar

Belloc, Marianna and Federici, Daniela (2007): A Two-Country NATREX Model for the Euro/Dollar. Published in: CIDEI W.P. No. N. 76 (April 2007): pp. 1-30.

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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 for empirical estimation of the euro/dollar equilibrium exchange rate that will be carried out in future research.

JEL classification: F31; F36; F47

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