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Is the Exchange Rate a Shock Absorber? the Case of Sweden

This paper uses a structural vector autoregression representation of the Mundell-Flemming model to analyze the determinants of movements in Sweden’s real exchange rate. It finds that, while (supply and demand) shocks account for over 60 percent of the forecast error variance, comparable to several E...

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Bibliographic Details
Main Author: Thomas, Alun
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1997
Series:IMF Working Papers
Subjects:
Supply And Demand
Wealth
Economics
Economic Theory
Saving
Government Consumption
Real Effective Exchange Rates
Supply Shocks
Currency
Economic Theory & Philosophy
National Accounts
Foreign Exchange
International Finance: General
Consumption
Prices
Macroeconomics
Macroeconomics: Consumption
Real Exchange Rates
Agriculture: Aggregate Supply And Demand Analysis
Exchange Rates
Sweden
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper uses a structural vector autoregression representation of the Mundell-Flemming model to analyze the determinants of movements in Sweden’s real exchange rate. It finds that, while (supply and demand) shocks account for over 60 percent of the forecast error variance, comparable to several Economic and Monetary Union (EMU) countries, demand shocks account for a higher fraction of these real shocks in Sweden than in those core countries. If real demand shocks result from controllable macroeconomic policies, the cost of relinquishing the exchange rate is no higher, and may be lower, for Sweden than for most core EMU countries
Physical Description:22 pages
ISBN:9781451975499

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