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Temporal dimension and equilibrium exchange rate: A FEER/BEER comparison

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Author Info

  • Lòpez-Villavicencio, Antonia
  • Mazier, Jacques
  • Saadaoui, Jamel

Abstract

This paper investigates the temporal links between two models of equilibrium exchange rate, namely the behavioral and the fundamental approaches. Our results show that, even though in the long-run they are closely related, important differences are observed for some countries and/or some periods. Contrary to previous contributions, we analyze the factors that explain this disconnection. We outline structural changes in matter of competitiveness, the dynamics of foreign assets and valuation effects as explanations. This novel evidence is important if the two approaches for assessing misalignments are used for policy decisions such as setting tariffs to cope with the “currency war”.

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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 13 (2012)
Issue (Month): 1 ()
Pages: 58-77

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Handle: RePEc:eee:ememar:v:13:y:2012:i:1:p:58-77

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Web page: http://www.elsevier.com/locate/inca/620356

Related research

Keywords: Equilibrium exchange rate; Cointegration; Net foreign assets; Current account; Exchange rate;

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References

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  1. William R. Cline, 2008. "Estimating Consistent Fundamental Equilibrium Exchange Rates," Working Paper Series WP08-6, Peterson Institute for International Economics.
  2. Se-Eun Jeong & Jacques Mazier, 2003. "Exchange Rate Regimes and Equilibrium Exchange Rates in East Asia," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 1161-1182.
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  7. Nabil Aflouk & Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2011. "Exchange Rate Misalignments and World Imbalances: a FEER Approach for Emerging Countries," Post-Print halshs-00484808, HAL.
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  14. Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," Economie Internationale, CEPII research center, issue 121, pages 25-58.
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Citations

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Cited by:
  1. Jamel Saadaoui, 2013. "Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates?," Post-Print halshs-00861163, HAL.
  2. Zhang, Zhibai, 2012. "A simple model and its application in currency valuation," MPRA Paper 40650, University Library of Munich, Germany.
  3. Zhibai, Zhang, 2012. "A Simple Model and Its Application in the Valuation of Five Asian Real Exchange Rates," MPRA Paper 40953, University Library of Munich, Germany.
  4. Zhang, Zhibai & Chen, Langnan, 2013. "A New Assessment of the Chinese RMB Exchange Rate," MPRA Paper 49315, University Library of Munich, Germany.
  5. Saadaoui, Jamel, 2012. "Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente
    [Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]
    ," MPRA Paper 51332, University Library of Munich, Germany.

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