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22-02-2024
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From 2002-2018, the average real exchange rate between these two regions (expressed in the same form as in the previous question) was 1.30. Assume that this value represents the long-run equilibrium real exchange rate. Combining this assumption with your answer from #18, what would you forecast the real exchange rate to be in 2019? Assume that the speed of convergence in the real exchange rate to its equilibrium value is 25% per year.

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