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.

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

• Item Type: MPRA Paper
• Institution: University of Cassino
• Language: English
• Keywords: Key words: NATREX; equilibrium exchange rate; euro/dollar; structural approach
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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