Econometrics Seminar Series. "Piecing the Puzzle: Real Exchange Rates and Long-run Fundamentals"
Published: 3 November 2025
14 November 2025. Professor Hilde C. Bjørnland, BI Norwegian Business School
Professor Hilde C. Bjørnland, BI Norwegian Business School
"Piecing the Puzzle: Real Exchange Rates and Long-run Fundamentals"
Friday, 14 November 2025. 15:00
Room 487 ASBS
Abstract
This paper examines the structural determinants of real exchange rates, with a particular focus on the persistent low-frequency movements that standard models like Purchasing Power Parity (PPP) and Uncovered Interest Parity (UIP) fail to explain. We develop a small open economy (SOE) framework that highlights how long-run productivity differentials and sectoral spillovers, often amplified in resource-dependent economies, anchor the real exchange rate over time. Guided by this theory, we estimate a Bayesian structural VAR with common trends, which allows us to disentangle transitory from persistent components and identify the structural shocks driving exchange rate dynamics. Applying the model to Canada and Norway, both resource-rich economies, we show that productivity and sectoral activity are central in shaping long-run currency movements, while monetary policy primarily accounts for short-run fluctuations.
Bio
Hilde C. Bjørnland is Professor of Economics at BI Norwegian Business School, scientific advisor to Norges Bank, and Director of the Centre for Applied Macroeconomics and Commodity Prices (CAMP). She holds a PhD in Economics from the University of Oslo, where her thesis received His Majesty The King of Norway’s Gold Medal, and an MSc in Econometrics and Mathematical Economics from the London School of Economics. Bjørnland’s research focuses on applied macroeconomics and time series. Special interests include business cycles, commodity prices, and fiscal- and monetary policy. She has published in leading journals including the American Economic Journal: Macroeconomics, the Journal of Monetary Economics, and the Review of Economics and Statistics. In addition, she has contributed broadly to economic policy, serving on several public committees, advisory councils, and boards. She has also served as Provost for Research and Academic Resources at BI.
For further information, please contact business-seminar-series@glasgow.ac.uk.
We are committed to providing a collegial, inclusive, and intellectually stimulating environment for all our seminars, in accordance with our established Code of Conduct.
First published: 3 November 2025