Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-12-04T09:36:03.906Z Has data issue: false hasContentIssue false
  • English
  • Français

Feers and the Path to EMU

Published online by Cambridge University Press:  26 March 2020

Ray Barrell  and
J.W. In't Veld
Ray Barrell
Affiliation:
NIESR
J.W. In't Veld
Affiliation:
NIESR
Get access Rights & Permissions [Opens in a new window]

Extract

The concept of the Fundamental Equilibrium Exchange Rate (FEER) was first used in Williamson (1983) to calculate the misalignments of the exchange rates for major currencies, and as a basis for his target zone proposal. In this note we use the same concept in a different context, that of the relations amongst the European economies which are members of the ERM, a system which is evolving towards monetary union. The first section reviews the concept of the FEER and its use in policy analysis. The second section relates this to the analysis of real exchange rates and external balance within a potential monetary union. The third section includes new estimates of FEERs using the most recent version of our world model, and considers the possible future evolution of FEERs in the context of EMU, including some tests of the sensitivity of these estimates to parametric change.

Type
Articles
Information
National Institute Economic Review , Volume 137 , August 1991 , pp. 51 - 58
Copyright
Copyright © 1991 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We would like to thank Andrew Britton, Andrew Gurney and Garry Young for their comments on an earlier version of this note, and John Williamson and Simon Wren-Lewis for many helpful discussions.

References

Alogoskoufis, G.A. (1989), ‘On fiscal policy, external imbalances and fundamental equilibrium exchange rates’, CEPR discussion paper 322.Google Scholar
Barrell, R., (1988), ‘Exports of manufactures’, HM Treasury Academic Panel Paper.Google Scholar
Barrell, R. and Wren-Lewis, S. (1989), ‘Fundamental equilibrium exchange rates for the G7’, CEPR discussion paper 343.Google Scholar
Barrell, R., Gurney, A. and in 't Veld, J.W. (1991), ‘The introduction of wealth into a model of the world economy’, NIESR mimeo.CrossRefGoogle Scholar
Currie, D. and Wren-Lewis, S. (1989a), ‘An appraisal of alternative blueprints for international policy coordination’, European Economic Review, 33, pp.1769–86.CrossRefGoogle Scholar
Currie, D. and Wren-Lewis, S. (1989b), ‘A comparison of alternative regimes for international macropolicy coordination’, in Eichengreen, B. and Portes, R. (eds): Blueprints for Exchange Rate Management, Academic Press.Google Scholar
Edison, H.J., Miller, M. and Williamson, J. (1987), ‘On evaluating and extending the target zone proposal’, Journal of Policy Modelling, 1.CrossRefGoogle Scholar
Frenkel, J.A., Goldstein, M. and Masson, P. (1989a), ‘The Rationale for, and Effects of, International Economic Policy Coordination’, in Branson, W., Frenkel, J. and Goldstein, M. (eds): Policy Coordination and Exchange Rates, University of Chicago Press.Google Scholar
Frenkel, J.A., Goldstein, M. and Masson, P. (1989b), ‘Simulating the effects of simple coordinated versus uncoordinated policy rules’, in Bryant, R.C. et al.(eds): Macroeconomic Policies in an Interdependent World, Brookings Institution.CrossRefGoogle Scholar
Hendry, D.F. and Von, T. Ungern-Sternberg (1982), ‘Liquidity and inflation effects on consumers' expenditure, in Deaton, A. (ed): Essays in the Theory and Measurement of Consumer Behaviour, Cambridge University Press.Google Scholar
Houthakker, H.S. and Magee, S.P. (1969), Income and price elasticities in world trade’, Review of Economics and Statistics, 51, pp.111–25.Google Scholar
Masson, P. and Tryon, W. (1990), ‘Macroeconomic effects of projected population ageing in industrial countries’, IMF Working Paper 90/5.CrossRefGoogle Scholar
Rousse, H., ‘Effets de demande et d'offre dans les resultats du commerce exterieur manufacture de la France au cours des deux dernieres decennies’, Documents de travail G n.9105., INSEE.Google Scholar
Schatz, K.W., Scheide, J. and Trapp, P. (1988), ‘Short-term prospects for the European economies’, Congiuntura Italiana, 31 no.5.Google Scholar
in't Veld, J.W. (1991), ‘Fundamental balance and equilibrium exchange rates’, Journal of International Money and Finance, forthcoming.Google Scholar
Williamson, J. (1983,1985), ‘The exchange rate system’, Policy Analyses in International Economics, no.5, Institute for International Economics, Washington DC.Google Scholar
Williamson, J. and Miller, M. (1987), ‘Targets and indicators: a blueprint for the international coordination of economic policy’, Policy analyses in international economics, no.22, Institute for International Economics, Washington DC.Google Scholar
Williamson, J.(1990), ‘Equilibrium exchange rates: an update’, mimeo.Google Scholar
Wren-Lewis, S. and Barrell, R. (1990), ‘Calculation of FEERs using steady state GEM for John Williamson's ‘Equilibrium exchange rates: an update’, NIESR mimeo.Google Scholar
Wren-Lewis, S., Westaway, P., Soteri, S. and Barrell, R. (1991), ‘Evaluating the UK's choice of entry rate into the ERM’, Manchester School, Supplement.Google Scholar