Assessment of Fiji's exchange rate

Prabheesh, K P (2023) Assessment of Fiji's exchange rate. Economic Analysis and Policy, 78. pp. 1282-1305. ISSN 0313-5926

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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.

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IITH Creators:
IITH CreatorsORCiD
Prabheesh, K Phttps://orcid.org/0000-0001-6323-8217
Item Type: Article
Uncontrolled Keywords: Basket pegs; Behavioural Equilibrium Exchange Rate; Exchange rate; Fiji; Misalignment; exchange rate; Australian Dollar
Subjects: Social sciences > Management
Social sciences > Political Science & Economics
Social sciences > Business Finance
Divisions: Department of Liberal Arts
Depositing User: Mr Nigam Prasad Bisoyi
Date Deposited: 26 Nov 2023 11:16
Last Modified: 26 Nov 2023 11:16
URI: http://raiith.iith.ac.in/id/eprint/11760
Publisher URL: https://doi.org/10.1016/j.eap.2023.05.013
OA policy: https://www.sherpa.ac.uk/id/publication/35764
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