2016年-PIIE彼得森国际经济研究所_Estimates_of_Fundamental_Equilibrium_Exchange_Rates_May_2013_16页_215kb

Summary of "Estimates of Fundamental Equilibrium Exchange Rates, May 2013"

Core Content

This document presents updated estimates of Fundamental Equilibrium Exchange Rates (FEERs) based on the International Monetary Fund's (IMF) World Economic Outlook (WEO) projections for May 2013. The analysis focuses on current account balances and exchange rate movements across major economies, with particular attention to Japan, the United States, and China.

Main Findings

• Japan: The yen has depreciated significantly, with a real effective exchange rate (REER) decline of 20.4 percent from October 2012 to April 2013. Despite this depreciation, the IMF's 2018 current account surplus projection remains at 1.83 percent of GDP, rather than increasing as expected. The author's adjusted estimate places Japan's 2018 surplus at 4.6 percent of GDP, indicating a need for corrective appreciation. This result suggests that the yen has overshot its equilibrium level by nearly 10 percent.

• United States: The US dollar has depreciated slightly, with a REER decline of 0.3 percent. The US current account deficit is projected to remain at 3.5 percent of GDP by 2018, which is considered a modest overvaluation. The author adjusts the surplus projection to 3.3 percent of GDP, slightly below the IMF's 3.5 percent, indicating a need for a modest appreciation.

• China: The current account surplus is projected to reach 4.0 percent of GDP by 2018, which is considered excessive. However, this is a more moderate imbalance compared to the 2006–07 period when surpluses reached 10 percent of GDP. The author's analysis suggests that China's surplus is likely to be even higher if the real effective exchange rate continues to appreciate.

• Other Economies: The study identifies overvaluations in Australia, New Zealand, South Africa, and Turkey, and undervaluations in Singapore, Taiwan, Sweden, and Switzerland. The real effective exchange rate for the euro area has appreciated slightly, while the yen's depreciation has had a significant impact on other economies.

Key Policy Implications

• Japan's Yen Depreciation: The sharp decline in the yen (23 percent against the dollar) has been a major challenge for international policy. The document questions whether and when G-7 and G-20 authorities should intervene to prevent further depreciation.

• Currency Code of Conduct: The author suggests the need for a Currency Code of Conduct among leading economies to prevent competitive devaluation and ensure exchange rate stability.

• Exchange Rate Adjustments: The study proposes a variant of the FEER methodology where rich countries (e.g., the US, Canada, UK, Australia, New Zealand) are set a floor target of at least a zero current account balance, and emerging market economies are set a ceiling target of zero. This would imply larger adjustments for both the US dollar and the Chinese yuan.

• Impact of Quantitative Easing: The document highlights the role of quantitative easing (QE) in driving capital flows and affecting exchange rates. It notes that QE has been criticized by emerging market economies, particularly Brazil and Russia, for pushing up their exchange rates and causing competitive losses.

Methodology and Adjustments

• The FEER estimates are based on the Symmetric Matrix Inversion Method (SMIM), which links exchange rate movements to current account balances.

• The IMF's baseline projections are adjusted for exchange rate changes between different periods. For example, the 2018 current account surplus for Japan is adjusted from 1.83 percent to 4.6 percent, reflecting the impact of yen depreciation.

• The real effective exchange rate (REER) is a key metric in the analysis. For instance, the yen's REER fell by 20.4 percent from October 2012 to April 2013, while the euro area's REER appreciated by 1.5 percent over the same period.

• The US current account deficit is projected to remain at 3.5 percent of GDP by 2018, but the author suggests a slight adjustment to 3.3 percent of GDP due to exchange rate changes.

• The author's target current account for each economy is set within a ±3 percent of GDP band, with exceptions for major oil exporters.

Table Highlights

• Table 1: Reports the changes in real effective exchange rates (REER) and nominal dollar rates from October 2012 to April 2013. Japan's yen experienced the largest depreciation (23.1 percent against the dollar), while the euro appreciated slightly.

• Table 2: Shows the IMF's current account projections for 2013 and 2018, along with the author's adjusted estimates and FEER target levels. Japan's 2018 surplus is adjusted to 4.6 percent, which is 2.9 percent higher than the IMF's projection. China's surplus is adjusted to 4.0 percent, and the US deficit is adjusted to 3.3 percent.

• Table 3: Provides the results of the simulation using the SMIM model, showing the required changes in REER and the dollar exchange rate to align with the FEER targets.

Conclusion

The study concludes that while the US and China exhibit only modest over- and undervaluation, Japan's yen has significantly overshot its equilibrium level. The author advocates for a more balanced international economic framework, where exchange rates adjust to reflect the natural flow of capital from rich to poor countries. The analysis also underscores the need for coordinated international policy to address exchange rate imbalances and prevent competitive devaluation.