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Is the Cyprus Pound Real Effective Exchange Rate Misaligned? A BEER Approach

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  • Charalambos Pattichis
  • Marios Maratheftis
  • Stavros Zenios

Abstract

This paper investigates whether the real effective exchange rate of the Cyprus pound is misaligned by generating measures of the equilibrium rate using the Behavioral Equilibrium Exchange Rate (BEER) approach. Several measures of the equilibrium exchange rate were derived and used to check for the existence of exchange rate misalignment. The results suggest that, during the 1990s, the actual real effective exchange rate and the various equilibrium measures generated move closely together and there is no evidence of any significant and persistent misalignment. However, the empirical evidence suggests persistent overvaluation during the 1980s.

Suggested Citation

  • Charalambos Pattichis & Marios Maratheftis & Stavros Zenios, 2007. "Is the Cyprus Pound Real Effective Exchange Rate Misaligned? A BEER Approach," International Economic Journal, Taylor & Francis Journals, vol. 21(1), pages 133-154.
    • Handle: RePEc:taf:intecj:v:21:y:2007:i:1:p:133-154
    DOI: 10.1080/10168730601181026
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    2. Ms. Susana Garcia Cervero & J. Humberto Lopez & Mr. Enrique Alberola Ila & Mr. Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates: Euro, Dollar, “Ins,” “Outs,” and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 1999/175, International Monetary Fund.
    3. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, April.
    4. MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank.
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    2. Frenkel Michael & Koske Isabell, 2012. "Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(2), pages 129-145, April.

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