Estimating an Equilibrium Exchange Rate for the Argentine Peso
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World Bank, Washington, DC
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This paper assesses the equilibrium
value of the Argentine peso exchange rate based on the
country's economic fundamentals and compares it with
the official exchange rate value. The paper estimates a
behavioral equilibrium exchange rate model that allows for
movements in the equilibrium real effective exchange rate
based on changing economic fundamentals, using monthly data
from 1980 to 2015. The analysis identifies four key
fundamentals driving the equilibrium exchange rate in
Argentina: terms of trade, productivity differentials,
foreign currency reserves, and trade openness. Based on
these fundamentals, before the exchange rate reunification
that took place at the end of 2015, the Argentine peso was
overvalued by 39 percent. The results are robust to
alternative estimation approaches.
Palabras clave
MONETARY POLICY, STOCK PRICES, TIME HORIZON, PRODUCTION, PRICE LEVELS, ADJUSTMENT PATH, LAGS, UNDERVALUATION, STOCK, STRUCTURAL CHANGE, DOLLAR RATE, INTEREST, DEPRECIATION, COMMON CURRENCY, REAL EXCHANGE RATES, CONSUMER PRICE INDICES, EXPECTATIONS, MONEY SUPPLY, TRADE BARRIERS, INTEREST RATE, REAL GDP, EXCHANGE, GDP PER CAPITA, EXPORTS, ELASTICITY, BLACK MARKET, POLITICAL ECONOMY, RISK PREMIUM, FOREIGN CURRENCY RESERVES, BONDS, DEVALUATION, EQUILIBRIUM, VARIABLES, TRADE OPENNESS, MARKET EXCHANGE RATE, PAYMENTS, WEALTH, INFLATION, TRENDS, CENTRAL BANK, CHOICE, MACROECONOMIC STABILITY, EFFECTIVE EXCHANGE RATE, INFLUENCE, TRADE BALANCE, CURRENCY, DEVELOPMENT ECONOMICS, ERROR CORRECTION MODEL, EXOGENOUS VARIABLES, CURRENT ACCOUNT, MONEY, PARALLEL MARKETS, EXCHANGE RATES, BASE YEAR, PRODUCTIVITY, ECONOMETRICS, IMPERFECT COMPETITION, QUOTAS, CRITERIA, PARALLEL MARKET, NET EXPORTS, DEBT, INFLATION RATE, MULTIPLE EXCHANGE RATES, BLACK MARKET EXCHANGE RATE PREMIUM, IMPORTS, BLACK MARKET EXCHANGE RATE, CONSUMER PREFERENCES, TRADE POLICY, EXCHANGE RATE MISALIGNMENT, REAL INTEREST RATE, MACROECONOMIC BALANCE, AVERAGING, DISTORTIONS, FOREIGN CURRENCY, ECONOMIC RESEARCH, TAXES, ROBUSTNESS CHECK, UNEMPLOYMENT, PRODUCTIVITY GROWTH, CONSUMPTION, MISALIGNMENT, VALUE ADDED, CAPITAL CONTROLS, INTERNATIONAL RESERVES, CAPITAL, WAGES, DEFLATORS, ECONOMETRIC ANALYSIS, EQUILIBRIUM LEVEL, FINANCIAL CRISIS, VALUE, COMPETITIVENESS, CREDIT, MACROECONOMICS, PURCHASING POWER, EXCHANGE MARKETS, ARBITRAGE CONDITIONS, AGGREGATE DEMAND, PARALLEL EXCHANGE RATES, CONSUMERS, AGRICULTURE, ECONOMY