Working Paper Series,
Trade Union Institute for Economic Research

Abstract: This paper presents evidence on the behavior of the Swedish real exchange rate relative to Germany under different currency regimes 1973:1-2001:4. The results suggest that the real exchange rate is cointegrated with Swedish and German productivity, which is consistent with Balassa (1964) and Samuelson (1964). In the short run, the regime has mattered for the dynamics of the real exchange rate. Deviations from equilibrium have been adjusted more quickly when the nominal exchange rate has been allowed to float freely, which indicates that it acts as a shock absorber.

Keywords: Real exchange rate; Exchange rate regimes; Cointegration

JEL-codes: C22; E31; F41

29 pages, First version: November 11, 2002. Revised: September 18, 2003.

Note: This paper is a considerably revised version of my master thesis written at Stockholm University.

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Anna Larsson, (2004), 'The Swedish Real Exchange Rate under Different Currency Regimes', Review of World Economics, vol 40, no 4, pages 706-727

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