Deer Hunting: Misalignment, Debt Accumulation and Desired Equilibrium Exchange Rates

36 Pages Posted: 15 Feb 2006

See all articles by Michael J. Artis

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG)

Date Written: June 1993

Abstract

This paper deals with hysteresis in the desired equilibrium exchange rate (DEER) arising from misalignment. When the actual real exchange rate departs from its DEER value current account realizations--and consequently debt service obligations--will differ from those assumed in the initial DEER calculation necessitating its recomputation. The paper derives a formal expression for this hysteresis effect in the DEER studies the convergence properties of a system in which the evolution of actual exchange rates depends on the DEER and provides illustrative calculations of its historical significance. Finally the paper derives and applies rules of thumb for computing the hysteresis effect when considering the rate of approach of an exchange rate to its DEER value.

JEL Classification: F31

Suggested Citation

Artis, Michael J., Deer Hunting: Misalignment, Debt Accumulation and Desired Equilibrium Exchange Rates (June 1993). IMF Working Paper No. 93/48, Available at SSRN: https://ssrn.com/abstract=883510

Michael J. Artis (Contact Author)

University of Manchester - Institute for Political & Economic Governance (IPEG) ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
149
Abstract Views
794
rank
234,910
PlumX Metrics