Brooks, R., H. Edison, and F. Vitek, 2008, “Exchange Rate Assessments for Australia and New Zealand,” forthcoming IMF Working Paper.
Hunt, B., and A. Rebucci, 2005, “The U.S. Dollar and Trade Deficit: What Accounts for the Late 1990s?” International Finance Vol. 8, No. 3, pp. 399 -434.
International Monetary Fund, 2006, “Methodology for CGER Exchange Rate Assessments,” available on the web http://www.imf.org/external/pp/longres.aspx?id=3957.
Laxton D., and P. Pesenti, 2003, “Monetary Policy Rules for Small, Open, Emerging Economies,” Journal of Monetary Economics, 50, pp. 1109 -1146.
Macdonald, R., 2001, “Modelling the Long-Run Real effective Exchange Rate of the New Zealand Dollar,” Reserve Bank of New Zealand Discussion Paper, DP2002/02.
Wren-Lewis, S., 2004, “A Model of Equilibrium Exchange Rates for the New Zealand and Australian Dollars,” Reserve Bank of New Zealand Discussion Paper, DP2004/07.
Appendix: Brief Overview of GEM
44. GEM is a multi-region, multiple-good model of the world economy that is derived completely from optimizing foundations.14 In each region there are households, firms, and a government. Households maximize utility derived from the consumption of goods and leisure. Firms combine capital, and labor, with either non-energy commodities or land to maximize the net income from goods production. Governments consume goods financed through non-distorting taxes and adjust short-term nominal interest rates to provide nominal anchors.
Prepared by Ben Hunt (Ext. 3-6361).
A value of 1 would be the most often used calibration for this parameter in the literature. However, some studies have used values between 2 and 3.
Using the terms of trade rather than commodity prices, MacDonald (2001), reports an elasticity of 1.85.