Equilibrium exchange rate
The connotation of forexrebateindonesia Forex rebate king cashbackinforex Equilibrium exchange rate first refers to the exchange rate that can make the balance of payments to achieve equilibrium, th cashback forex connotation of equilibrium exchange rate focus on external equilibrium, but not completely disregard the internal equilibrium, one of its prerequisites is no excessive unemployment, which is very similar to the measure of internal equilibrium later, Nurkse (Nurkse) developed the theory of equilibrium exchange rate he defined the internal equilibrium as The so-called equilibrium exchange rate is the exchange rate that is consistent with the internal Forexrebateking external macroeconomic equilibrium, that is, the exchange rate that is determined when both internal and external equilibrium are achieved at the same time. The intersection of the two curves determines the specific level of the equilibrium exchange rate, and at the same time divides four quadrants, the nature of the imbalance in different quadrants is also different, which is the famous Swan image of the equilibrium exchange rate literature review The earliest research on the equilibrium exchange rate can be traced back to the purchasing power parity theory at the beginning of the 20th century. Swan proposed that the equilibrium exchange rate is an exchange rate that is consistent with macroeconomic and internal and external economic equilibrium, with internal equilibrium meaning that the economy achieves its potential level of output and external equilibrium meaning that the capital account achieves sustainable net factor flows between countries Domestic scholars views on the equilibrium exchange rate are not consistent with the above views Consistent with the above views Jiang Polk, Xu Shaoqiang, and Li Tiandong put forward a different concept of equilibrium exchange rate: the exchange rate that can maintain stable economic growth without liquidity constraints on the balance of payments is the equilibrium exchange rate and it is a nominal exchange rate in the short to medium term, so that both domestic and foreign money and asset markets can be taken into account They also classify the equilibrium exchange rate, arguing that the equilibrium exchange rate is not a The equilibrium exchange rate is not a fixed value, but a dynamically changing range, in which the lower part of the value corresponds to the "investment-prone equilibrium exchange rate" and the higher part corresponds to the "consumption-prone equilibrium exchange rate", thus providing the possibility to choose the exchange rate policy. Zhang Bin believes that the equilibrium exchange rate is the level of exchange rate that is consistent with the maximization of economic welfare in the medium and long term, and under the conditions of an open economy, adjusting the real exchange rate to a level consistent with the equilibrium exchange rate is a core task of macroeconomic decision-making. However, the literature does not give a clear statement from the theoretical point of view on the existence of the equilibrium exchange rate or not. In fact, the dynamic development of exchange rates is highly uncertain, and the dramatic discontinuous changes in exchange rates prompt people to suspect that there may be a "multiple equilibria" (MultipleEquilibria), and from the point of view of equilibrium alone, there may be a low interest rate that can promote economic growth and sound development. A "good" equilibrium exchange rate with low interest rates that promotes sound economic growth and development, or a "bad" equilibrium exchange rate with high interest rates, high unemployment, and slow economic growth, which may differ significantly from the "good" equilibrium exchange rate. The external shocks may be the reason for the change from the "good" equilibrium exchange rate to the "bad" equilibrium exchange rate. "Third, the equilibrium exchange rate is an unobservable quantity that needs to be estimated using certain methods under certain assumptions. Fourth, the equilibrium exchange rate should be a dynamically changing quantity Whether it is an internal or external equilibrium, or an equilibrium exchange rate consistent with economic fundamentals, it will undoubtedly change with the development of the economic situation If so, it is necessary to distinguish whether the equilibrium exchange rate changes dynamically with the economic situation or jumps from one equilibrium to another in the framework of multiple equilibria Ding Jianping "In practice, even economists themselves do not know when the exchange rate adjustment reaches a new equilibrium point" The purpose of studying the equilibrium exchange rate can be said to be, to some extent, to find a benchmark for the exchange rate in order to have an idea of whether the current exchange rate is out of balance and how serious it is, so that corresponding measures can be taken to At the same time, the equilibrium exchange rate also provides a reference for the private sector and the government to forecast the future trend of the exchange rate. As an unobservable economic variable, the multiplicity and dynamics of the equilibrium exchange rate is the reason why no one exchange rate regime is absolutely better than the others in real life, as if all exchange rate regimes have their own rationality, but on the other hand, all exchange rate regimes cannot be simply applied to the determination of the equilibrium exchange rate in other economies. He started from the constant equation of current account and capital account, and further expressed the current account as a linear function of total domestic output, total foreign output and real exchange rate, on the basis of which the equilibrium exchange rate can be found, and the biggest problem of its measurement is how to determine the equilibrium level of capital account. The third is the general equilibrium equilibrium exchange rate calculation method, which is divided into large (Williamsons FEER) and small (Bu Yongxiangs DLR method) models. Behavioral equilibrium exchange rate theory uses cointegration analysis to directly estimate the long-run stable relationship between the real exchange rate and the underlying economic factors, and can further use vector error correction models (VECM) to estimate the direction and magnitude of exchange rate deviations from the long-run equilibrium level in the short run and the speed of adjustment to the equilibrium level Zhang Zhichao uses behavioral equilibrium exchange rate theory to study the Hong Kong This approach is gradually adopted by domestic scholars Zhang Xiaopu measured the equilibrium exchange rate and the dislocation of the RMB in 1998; Liu Leah and Ren Ruoyen used Edwards ERER model to measure the equilibrium effective exchange rate of the RMB and obtained conclusions very close to Zhang Xiaopus Qin Wanshun, Jin Yunhui, and Bu Yongxiang by examining the real exchange rate of the RMB and the terms of trade, Chinas relative This method uses cointegration analysis techniques, takes into account the possible unit root problem among the data, examines the problem of data smoothness, and to some extent avoids the "pseudo" problem. Using the vector error correction model, we can analyze the deviation of the exchange rate from the long-term equilibrium exchange rate in the short run, the direction of deviation, and thus have an idea of the general direction of the exchange rate in the near future, and estimate the speed of return of the exchange rate to its long-term equilibrium level. Here, the equilibrium exchange rate in the model is estimated by finding such an exchange rate with a stable long-term relationship with the fundamentals of the economy There are several possible problems with this approach: First, the model does not take into account the heteroskedasticity problem, which cannot be ignored if the exchange rate is determined during the process of determination, or if the mechanism of exchange rate generation changes, for example, from a fixed exchange rate to a floating exchange rate regime Second, as far as the cointegration relationship is concerned, the heteroskedasticity problem in the model cannot be ignored There may be more than one cointegration relationship between variables, there may be two, three or even more, accordingly, we can estimate to get two or more equilibrium exchange rate values, then, which one equilibrium exchange rate value should we take as the prevailing one? Fortunately, the sample data used in the aforementioned literature have only one cointegration relationship. On the other hand, such a cointegration relationship is likely to be non-existent, which also involves the existence of equilibrium exchange rates as we mentioned earlier. The factors used in various literatures to describe the fundamentals of the economy vary widely; Liu Leah and Ren Ruoyen use the terms of trade, government spending on non-trade goods, trade restrictions and transaction control system, technological progress, and debt service ratio; Zhang Zhichao uses the indicators of terms of trade, resource balance, investment rate, and openness of the economy; Qin Wanshun, Jin Yunhui, and Bu Yongxiang use the indicators of Chinas terms of foreign trade, China Zhang Xiaopu uses indicators such as terms of trade, openness of the economy, and the ratio of government spending to GDP Whether their cointegration relationship is related to the selection of indicators needs to be further explored Fourth, although the method illustrates the deviation of the exchange rate from the equilibrium exchange rate and also provides a measure of the direction and size of the adjustment to the equilibrium exchange rate for exchange rate imbalances in the short run, the The method does not tell us how and by what mechanism the disequilibrium exchange rate returns to equilibrium, which is crucial for the equilibrium exchange rate and exchange rate policy. The equilibrium exchange rate is not only not a fixed value, but it is constantly moving and thus is a moving equilibrium, and its value is not unique. The premise is overly strict and therefore yields a very strong proposition However it at least shows that the equilibrium exchange rate can not be unique According to the above discussion, rather than the equilibrium exchange rate would be multiple equilibrium, it would be interval equilibrium Any value within the interval is an equilibrium value because they can all enable simultaneous internal and external equilibrium The lower bound of the interval is determined by the boundary of the balance of payments subject to the liquidity constraint, and the The upper limit is determined by the domestic inflation rate, and the different positions in the interval correspond to equilibrium exchange rates of different nature, where the lower part of the currency corresponds to the "investment-prone equilibrium exchange rate" and the higher part corresponds to the "consumption-prone equilibrium exchange rate "Since the equilibrium exchange rate affects economic growth in the process of its realization, it is no longer just a ratio between different currencies, but can be used as a policy tool for operation and regulation, i.e. it is a lever that has an impact on investment, consumption, and money and asset markets, and it is a comprehensive policy tool. It is a comprehensive policy tool that can be used to regulate both aggregate social demand and aggregate social supply; it can be used as both a demand-increasing and demand-decreasing policy tool and a demand-switching policy tool. This is of great significance for Chinas policy regulation, because there are too few tools available for policy matching. "He then proposed the "variable multi-instrument principle" to deal with the complexity of multidimensional conditions, and pointed out that unless the government has more independent policy instruments The non-uniqueness of the equilibrium exchange rate allows it to act as an instrument of policy regulation, which is very relevant for achieving internal and external equilibrium through policy mix and policy regulation.
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