Working Paper presents research work by both Danmarks Nationalbank’s employees and our partners. The series is primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Other economic analysis

Reale effektive ligevægtsvalutakurser for Danmark

This paper sets out by looking at the purchasing power parity theory applied on Denmark, using real effective exchange rate measures published by Danmarks Nationalbank. Following this, two commonly used methods of determining equilibrium exchange rates are examined. First, a model of time-varying equilibrium exchange rates is explored, whereby the development of real effective exchange rates is sought explained by a number of variables. Secondly, the so-called macroeconomic balance approach, which has often been used by the IMF, is examined.Overall, it is found that the real effective exchange rate for Denmark is not far from equilibrium, even though the real effective exchange rate of the krone has strengthened over the past 25 years. (only in Danish).