Discussion Papers no. 326
The case of Norway
Fundamental determinants of the long run real exchange rate
Modelling the Norwegian exchange rate against a basket of currencies, we find a robust long-term link between the real exchange rate and real interest differential that is consistent with purchasing power parity (PPP) and uncovered interest parity (UIP). However, PPP alone is rejected. These findings are confirmed focusing on the Norwegian bilateral exchange rate with Germany and (possibly) Sweden, but rejected against the UK and the US. We argue that rejection of bilateral relationships may result from idiosyncratic shocks in the different countries that may be negligible when modelling against a basket of currencies.
Om publikasjonen
- Tittel
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Fundamental determinants of the long run real exchange rate. The case of Norway
- Ansvarlige
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Hilde Christiane Bjørnland, Håvard Hungnes
- Serie og -nummer
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Discussion Papers no. 326
- Utgiver
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Statistics Norway
- Emne
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Discussion Papers
- Antall sider
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39
- Målform
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Engelsk
- Om Discussion Papers
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Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.
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