NATREX

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The NATREX stands for NATural Real EXchange rate. It attempts to give a fair value for a currency. It is part of the family of long run equilibrium exchange rate theories (FEER, BEER, and NATREX). Notably the The approach offers an alternative paradigm to the Purchasing Power Parity for equilibrium real exchange rates. The acronym NATural Real EXchange refers to a medium-run, inter-cyclical equilibrium real exchange rate, determined by r

The NATREX model supposes a real exchange rate that both ensures internal equilibrium (production is postulated as reaching its potential) and external equilibrium (evenness of the current account balance) of the economy.

A medium-term NATREX models results from the interaction between medium-term determinant factors of both capital flows and the current account balance.

A long-term NATREX corresponds to the stability of both the net external position and capitalistic intensity.

Natrex can be compared to PPP (Purchasing Power Parity) type methods. These are based mainly on an analysis of the goods and services market. However the NATREX also integrates capital flows as long-term determining factors for exchange rates. This makes it easier to consider NATREX as a real equilibrium exchange rate