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Temporal Dimension and Equilibrium Exchange Rate: a FEER / BEER Comparison

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Author Info

  • Antonia Lòpez-Villavicencio

    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

  • Jacques Mazier

    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

  • Jamel Saadaoui

    ()
    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

Abstract

We analyze, in a unified theoretical framework, the two main models for equilibrium exchange rate, namely, the BEER and the FEER approaches. In order to understand the interactions between them, we study in detail the temporal links between these two measures. Our results show that, in average, the BEER and the FEER are closely related. Yet, important differences can be observed for some countries and/or some periods of time. Therefore, we analyze some of the factors that may explain this disconnection, identifying several aspects which are able to alter the relation between the current account and the real effective exchange rate, and so, between the FEER and the BEER. Our analysis puts forward the structural changes in matter of competitiveness, the dynamics of foreign asset positions and valuation effects as explanations for the divergence.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00535907.

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Date of creation: 01 Mar 2012
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Publication status: Published, Emerging Markets Review, 2012, 13, Issue 1, 58-77
Handle: RePEc:hal:journl:halshs-00535907

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00535907
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Related research

Keywords: Equilibrium Exchange Rate; BEER; FEER; Cointegration; Global Imbalances;

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References

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  1. Agnès Bénassy-Quéré & Sophie Béreau & Valérie Mignon, 2009. "Robust Estimations Of Equilibrium Exchange Rates Within The G20: A Panel Beer Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 608-633, November.
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  9. Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," Post-Print halshs-00435836, HAL.
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Citations

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Cited by:
  1. Jamel Saadaoui, 2013. "Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates," Working Papers of BETA 2013-14, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Zhang, Zhibai & Chen, Langnan, 2013. "A New Assessment of the Chinese RMB Exchange Rate," MPRA Paper 49315, 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, 2012. "A simple model and its application in currency valuation," MPRA Paper 40650, 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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