Coppola, AndreaLagerborg, AndresaMustafaoglu, Zafer2016-06-142016-06-142016-05https://hdl.handle.net/10986/24523This paper assesses the equilibrium value of the Argentine peso exchange rate based on the country's economic fundamentals and compares it with the official exchange rate value. The paper estimates a behavioral equilibrium exchange rate model that allows for movements in the equilibrium real effective exchange rate based on changing economic fundamentals, using monthly data from 1980 to 2015. The analysis identifies four key fundamentals driving the equilibrium exchange rate in Argentina: terms of trade, productivity differentials, foreign currency reserves, and trade openness. Based on these fundamentals, before the exchange rate reunification that took place at the end of 2015, the Argentine peso was overvalued by 39 percent. The results are robust to alternative estimation approaches.en-USCC BY 3.0 IGOMONETARY POLICYSTOCK PRICESTIME HORIZONPRODUCTIONPRICE LEVELSADJUSTMENT PATHLAGSUNDERVALUATIONSTOCKSTRUCTURAL CHANGEDOLLAR RATEINTERESTDEPRECIATIONCOMMON CURRENCYREAL EXCHANGE RATESCONSUMER PRICE INDICESEXPECTATIONSMONEY SUPPLYTRADE BARRIERSINTEREST RATEREAL GDPEXCHANGEGDP PER CAPITAEXPORTSELASTICITYBLACK MARKETPOLITICAL ECONOMYRISK PREMIUMFOREIGN CURRENCY RESERVESBONDSDEVALUATIONEQUILIBRIUMVARIABLESTRADE OPENNESSMARKET EXCHANGE RATEPAYMENTSWEALTHINFLATIONTRENDSCENTRAL BANKCHOICEMACROECONOMIC STABILITYEFFECTIVE EXCHANGE RATEINFLUENCETRADE BALANCECURRENCYDEVELOPMENT ECONOMICSERROR CORRECTION MODELEXOGENOUS VARIABLESCURRENT ACCOUNTMONEYPARALLEL MARKETSEXCHANGE RATESBASE YEARPRODUCTIVITYECONOMETRICSIMPERFECT COMPETITIONQUOTASCRITERIAPARALLEL MARKETNET EXPORTSDEBTINFLATION RATEMULTIPLE EXCHANGE RATESBLACK MARKET EXCHANGE RATE PREMIUMIMPORTSBLACK MARKET EXCHANGE RATECONSUMER PREFERENCESTRADE POLICYEXCHANGE RATE MISALIGNMENTREAL INTEREST RATEMACROECONOMIC BALANCEAVERAGINGDISTORTIONSFOREIGN CURRENCYECONOMIC RESEARCHTAXESROBUSTNESS CHECKUNEMPLOYMENTPRODUCTIVITY GROWTHCONSUMPTIONMISALIGNMENTVALUE ADDEDCAPITAL CONTROLSINTERNATIONAL RESERVESCAPITALWAGESDEFLATORSECONOMETRIC ANALYSISEQUILIBRIUM LEVELFINANCIAL CRISISVALUECOMPETITIVENESSCREDITMACROECONOMICSPURCHASING POWEREXCHANGE MARKETSARBITRAGE CONDITIONSAGGREGATE DEMANDPARALLEL EXCHANGE RATESCONSUMERSAGRICULTUREECONOMYWorking PaperWorld Bank10.1596/1813-9450-7682