The exchange rate misalignments, i.e. the over/under evaluation of currencies, remain at the heart of discussions of international finance. To define and to measure these misalignments, it’s necessary to refer to an equilibrium exchange rate. We consider that the relevant model must meet...

In May 1998, European authorities decided to fix in an irrevocable way the bilateral parities for the currencies of the 11 countries that have adopted the euro. The study of European bilateral exchange rates against the Deutschmark shows that in most cases these parities are very close to the...