While the majority of studies on purchasing power parity (PPP) and exchange rate forecasting focus on bilateral exchange rates, the purpose of this article is to analyse the aggregate nominal effective exchange rate index of six major currencies. Export and import price indexes are used to construct relative PPP-based equilibrium exchange rates. Applying an alternative approach based on the exchange rate deviations from equilibrium, we find half-lives of less than 1 year in some cases. Additionally, we report success rates of correctly predicting the direction of the exchange rate indexes as high as 70%. The success rates improve for longer horizons and when the investigation is restricted to large deviations from PPP-equilibrium. Finally, and most importantly, for the period following the start of the global financial crisis (2007 to 2012), the model outperforms the random walk for four of the six exchange rate indexes. The findings provide important implications for international market participants who are interested in a general guide about a currencies aggregate equilibrium level as well its future movements.

Purpose: This study examines Salvadorans’ perceptions of the Bitcoin Law, which made Bitcoin legal tender on September 7, 2021. Design/methodology/approach: We administer a survey in El Salvador and analyze the data using, among other methods, OLS regressions, ordered logit and ordered probit models. Findings: We find that Salvadorans distrust the Bitcoin Law, view it negatively, and became less favorable toward it after implementation. This sentiment is stronger among females, the more educated and conservatives, highlighting the role of socio-economic demographics. Interestingly, Bitcoin users distrust the law but not Bitcoin itself. The negative perception among those who claim to be knowledgeable about the currency, have used Bitcoin, and are more educated represents a paradox suggesting the distrust may be founded with the government rather than the Bitcoin currency itself. Practical implications: As the first country to mandate a cryptocurrency as legal tender, El Salvador’s experience, with low financial inclusion and institutional distrust, offer valuable lessons for policymakers in countries like Paraguay, Argentina, Nigeria and Brazil, where debates over digital currency adoption are ongoing. Our findings therefore extend beyond a single-country case, highlighting socio-economic challenges that may accompany similar reforms elsewhere. Originality/value: To our knowledge, no empirical study has investigated Salvadorans’ trust and perception of the new Bitcoin Law and the cryptocurrency itself, particularly regarding socio-economic factors and how perceptions have evolved since its introduction.

This study presents constructed equilibrium exchange rates (EERs) of the euro and its predecessors the European Unit of Account and the European Currency Unit, as well as the euro’s member states using a relative version of purchasing power parity (PPP) equilibrium. The revealed patterns of over- and undervaluation demonstrate how well suited the northern member states, in contrast to the southern states, were for the monetary union. Moreover, a relative persistent overvaluation for Greece and Portugal suggests that their ambition to join the euro reduced their competitiveness. The constructed EERs of the euro suggest the European Commission was able to set the initial value of the euro with a high degree of accuracy. Furthermore, the EERs indicate a successive strengthening of the fundamental value of the euro versus the U.S. dollar from 1999 to 2015. The analysis shows a close correlation between the deviations from equilibrium and the events of Greece’s sovereign debt crisis. In addition, the presented graphs show strong support for the PPP hypothesis. The results are robust to different constructed EERs and offer a guide to international market participants interested in the general equilibrium path of the euro and its predecessors.