6533b7d6fe1ef96bd126640f

RESEARCH PRODUCT

The Equilibrium Real Exchange Rate of Germany

Karlhans SauernheimerJerome L. Stein

subject

Exchange rateEffective exchange rateKeynesian economicsValue (economics)EconomicsEconomic modelCurrent accountTime preferenceTerms of tradeProductivity

description

The NATREX model defines the fundamental determinants of the equilibrium real effective exchange rate in the medium to longer run. The PPP theory is a special case of the NATREX when a linear combination of the fundamentals, which are productivity and social thrift, is stationary. The differences in social thrift under Schmidt and Kohl, and the effects of the European terms of trade upon the q-ratio, explain the variations in the NATREX in the preunification period. The actual real exchange rate of the German mark converged to the NATREX. In the postunification period, the medium run NATREX increased due to the rise in time preference and the cyclically adjusted q-ratio. The actual real exchange rate appreciated accordingly. However, the rise in time preference has lowered the longer run value of the NATREX.

yearjournalcountryeditionlanguage
1997-01-01
https://doi.org/10.1007/978-3-642-59246-1_3