Modelling the Long–run Real Effective Exchange Rate of the New Zealand Dollar

In this paper we use the behavioural and permanent equilibrium exchange rate approaches to produce long–run equilibrium exchange rates for the effective real exchange rates of the New Zealand dollar. We demonstrate that a well founded measure of the equilibrium value of the dollar may be recovered from a relatively small set of fundamental variables and that this can be used to produce an assessment of the dollar in terms of periods of misalignment.