Equilibrium Exchange Rates: a Guidebook for the Euro-Dollar Rate
AbstractIn this paper, we investigate different views of equilibrium exchange rates within a single, stock-flow adjustment framework. We then compare FEER and BEER estimations of equilibrium exchange rates based on the same, econometric model of the net foreign asset position, with special focus on the euro-dollar rate. These estimations suggest that, although more robust to alternative assumptions, the BEER approach may rely on excessive confidence on past behaviors in terms of portfolio allocation. Symmetrically, FEERs may underestimate the plasticity of international capital markets because they focus on the adjustment of the trade balance.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2008-02.
Date of creation: Mar 2008
Date of revision:
Equilibrium exchange rate; Euro-dollar; FEER; BEER; Global imbalances;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-CBA-2008-06-07 (Central Banking)
- NEP-EEC-2008-06-07 (European Economics)
- NEP-FMK-2008-06-07 (Financial Markets)
- NEP-MON-2008-06-07 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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