The aim of this study is to estimate the deviations of the actual real effective exchange rate of the euro area and of actual Harmonised Competitiveness Indicators of its main economies relative to values that are consistent with several key macroeconomic variables, such as GDP per capita and trade openness, in the years 1999-2017. The model employed in the analysis is a refinement of that first put forward by Fidora, Giordano and Schmitz (2018). The resulting estimates are then compared with those published by the International Monetary Fund and by CEPII.
The model provides estimates for the main euro-area countries in 2016 that do not differ systematically from those published by the International Monetary Fund and by CEPII.
For 2017 (for which comparable estimates are not yet available) the model points to a moderate overvaluation of the real effective exchange rate of the euro area, which is concentrated in the second half of the year, against a null average misalignment in 2016.
