IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Filtering the BEER: A permanent and transitory decomposition

  • Clark, Peter B.
  • MacDonald, Ronald

In this paper we extend the BEER (Behavioral Equilibrium Exchange Rate) approach which identifies an estimated equilibrium relationship between the real exchange rate and economic fundamentals. Here the economic fundamentals are decomposed using Johansen cointegration methods into transitory and permanent components, with the latter used to estimate the Permanent Equilibrium Exchange Rate, or PEER, for the U.S. and Canadian dollars and the pound sterling. The BEER and the PEER move closely together for the U.S. and Canadian dollars and generally track the actual exchange rate. By contrast, for the pound sterling the BEER and the PEER diverge sharply, with the latter following the actual exchange rate quite closely.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6W4F-4C8DDBC-1/2/470967c415859c7ed6de2ccfbd0e9785
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Global Finance Journal.

Volume (Year): 15 (2004)
Issue (Month): 1 ()
Pages: 29-56

as
in new window

Handle: RePEc:eee:glofin:v:15:y:2004:i:1:p:29-56
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620162

References listed on IDEAS
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.:

as in new window
  1. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
  2. Susana Garcia Cervero & J. Humberto Lopez & Enrique Alberola Ila & Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates; Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 99/175, International Monetary Fund.
  3. Peter Isard, 1983. "An Accounting Framework and Some Issues for Modeling How Exchange Rates Respond to the News," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 19-66 National Bureau of Economic Research, Inc.
  4. Campbell, John & Clarida, Richard, 1987. "The Dollar and Real Interest Rates," Scholarly Articles 3221495, Harvard University Department of Economics.
  5. Meese, R. & Rogoff, K., 1988. "Was It Real? The Exchange Rate-Interest Differential Ralation Over The Modern Floating-Rate Period," Working papers 368, Wisconsin Madison - Social Systems.
  6. Dominique Desruelle & Alessandro Zanello, 1997. "A Primeron the IMF's Information Notice System," IMF Working Papers 97/71, International Monetary Fund.
  7. Paruolo, Paolo, 2002. "Asymptotic Inference On The Moving Average Impact Matrix In Cointegrated I (2) Var Systems," Econometric Theory, Cambridge University Press, vol. 18(03), pages 673-690, June.
  8. Ronald MacDonald & Jun Nagayasu, 2000. "The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 5.
  9. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2000. "The Transfer Problem Revisited: Net Foreign Assets and Real Exchange Rates," CEPR Discussion Papers 2511, C.E.P.R. Discussion Papers.
  10. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  11. Kenneth A. Froot, 1990. "Short Rates and Expected Asset Returns," NBER Working Papers 3247, National Bureau of Economic Research, Inc.
  12. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
  13. Guy Meredith & Menzie D. Chinn, 1998. "Long-Horizon Uncovered Interest Rate Parity," NBER Working Papers 6797, National Bureau of Economic Research, Inc.
  14. Ronald MacDonald, 1995. "Asset Market and Balance of Payments Characteristics; An Eclectic Exchange Rate Model for the Dollar, Mark, and Yen," IMF Working Papers 95/55, International Monetary Fund.
  15. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  16. G. C. Lim, 2000. "Misalignment and Managed Exchange Rates; An Application to the Thai Baht," IMF Working Papers 00/63, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:glofin:v:15:y:2004:i:1:p:29-56. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.