Abstract
This paper empirically estimates Fiji’s bilateral equilibrium real exchange rate with two of its key trading partners, the US and Australia. Applying the Behavioural Equilibrium Exchange Rate (BEER) approach, we estimate the equilibrium exchange rate by considering the productivity differential, real interest rate differential, net foreign assets, money supply, and terms of trade. Using monthly data from March 2011 to September 2022 and a system approach to cointegration, a strong relationship between the real exchange rate and its fundamentals is found, but importance of factors differed by trading partner. Our findings show that the Fijian Dollar has been undervalued against both US Dollar and Australian Dollar in recent years, but to varying degrees. Our analysis underlines the importance of assessing bilateral exchange rate misalignments in basket pegs when devising exchange rate policy.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
