Eurozone needs structural reforms to realign real exchange rates – Italian paper

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The creation of the European single currency may have caused misalignments of its real exchange rate to last longer than similar problems with other currencies, a research paper published by the Bank of Italy argues.

In Real exchange rate misalignments in the euro area, Michael Fidora, Claire Giordano and Martin Schmitz use a behavioural equilibrium exchange rate, or Beer model, building on a 1998 paper by Peter Clark and Ronald MacDonald. This estimates the overvaluation of a country’s

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