This paper uses a one-equation model proposed by Baífes, Elbadawi and O'Connell (1999) with the intention of measuring the degree of misalignment between the observed multilateral real exchange and its estimated level of long run equilibrium, in the Argentinean case. With that purpose, annual data covering the period 1970-2001 for the multilateral real exchange rate and other macroeconomic variables are used. The econometric model used is a methodology alternative to most recent estimations that use vector error correction (VEC) models, in a tradition established by Johansen (1988). Our estimations show that by the end of the year 2001 the Argentinean currency was overvalued between 30% and 45% with respect to its equilibrium multilateral real exchange rate, depending on whether we use wholesale or consumer prices as the numerator of the multilateral real exchange rate.
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