The Equilibrium Exchange Rate of Argentina

In this paper we deduce the equilibrium real exchange rate equation, considering a set of two countries and two sectors in the framework of the New Open Economy Macroeconomics (Redux Model). Solving the optimization problem faced by the representative agent, and based on the Johansen cointegration estimation methodology, the long-run behavior of the real exchange rate of Argentina in the period 1968-2002 can be explained by net foreign assets, relative sectoral productivities and terms of trade

Alejandro Gay