2016年-PIIE彼得森国际经济研究所_Estimates_of_Fundamental_Equilibrium_Exchange_Rates_May_2014_21页_279kb

Summary of "Estimates of Fundamental Equilibrium Exchange Rates, May 2014"

Core Content

This document presents updated estimates of Fundamental Equilibrium Exchange Rates (FEERs) for 34 major economies as of May 2014. These estimates are based on the SMIM model, which simulates the impact of exchange rate changes on current account balances. The FEERs are calculated to reflect the medium-term equilibrium of exchange rates, aiming to correct for external imbalances that may arise from misalignments.

Main Findings

1. FEER Status of Major Currencies

• US, Euro Area, China, and Japan currencies are approximately at their FEER levels, indicating no need for adjustment to reduce external imbalances.
• The medium-term current account for the US is at the lower bound of the desired range.
• The euro area and China are at the upper bound of the desired range.
• Japan is undervalued in this round of estimates, but the FEER estimate for the yen is significantly lower than before due to ongoing structural issues.

2. QE Tapering and Emerging Market Currencies

• The US Federal Reserve's tapering of quantitative easing (QE) in early 2014 did not cause a second round of emerging-market currency turmoil.
• Brazilian real actually strengthened above levels seen in 2013.
• Turkey and South Africa real effective exchange rates (REERs) rebounded to their December 2013 levels by April 2014.
• Argentina remained an exception, with its real effective rate continuing to fall due to government concerns over falling reserves and currency misalignment.

3. Currency Misalignments

• Overvalued currencies: New Zealand, Turkey, South Africa, and Brazil.
• Undervalued currencies: Singapore, Taiwan, Sweden, and Switzerland.
• Japan has experienced a paradoxical situation where its current account surplus has not increased despite a sharp yen depreciation.
• China has depreciated the yuan significantly in 2014, with the currency now undervalued by about 1 percent.

4. Exchange Rate Impact on Current Account

• The SMIM model is used to estimate the impact of exchange rate changes on current account balances.
• The current account impact parameter (γ) is used to calculate the change in REER and its effect on the current account.
• The IMF projections are adjusted based on the FEERs method, which uses only half of the full impact parameter due to limited responsiveness of current account balances to exchange rate changes.
• The adjusted current account for Japan is 1.6 percent of GDP, while the FEER-consistent estimate is 2.1 percent, still within the 3 percent band for imbalances.

Key Points

• Japan's current account surplus has not increased despite yen depreciation, due to structural issues such as increased fuel imports and export weakness.
• The US and euro area are slightly overvalued, but the adjustment is moderate due to global adding-up properties of the model.
• The revaluation of the yuan has reduced its undervaluation from 3 percent to 1 percent.
• Australia's undervaluation has declined significantly, from 12 percent to 2 percent.
• Brazil has become overvalued again, and South Africa remains overvalued.
• Singapore and Taiwan are substantially undervalued, with Singapore at 23 percent and Taiwan at 14 percent.

Implications

• The US and euro area are not in need of adjustment to reduce external imbalances.
• China's depreciation may help reduce speculative capital inflows, but if it continues, it could face criticism from G-20 partners.
• Japan's misalignment is persistent, with structural issues likely to limit the impact of exchange rate changes on its current account.
• Emerging markets have generally resisted pressure from QE tapering, with only Argentina experiencing significant depreciation.

Summary Table of FEER Misalignments

Conclusion

The FEER estimates for May 2014 suggest that major currencies are generally aligned with their equilibrium levels, with limited need for adjustment. However, structural issues in Japan and China continue to influence current account balances, and emerging markets have shown resilience to QE tapering. The IMF projections are used as a baseline, with adjustments made based on exchange rate movements and model parameters. The FEER method ensures that exchange rate adjustments remain within acceptable bounds, avoiding excessive volatility.