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

Author

Listed:
  • Antonia Lòpez-Villavicencio

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Jacques Mazier

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Jamel Saadaoui

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Antonia Lòpez-Villavicencio & Jacques Mazier & Jamel Saadaoui, 2012. "Temporal Dimension and Equilibrium Exchange Rate: a FEER / BEER Comparison," Post-Print halshs-00535907, HAL.
    • Handle: RePEc:hal:journl:halshs-00535907
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00535907
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Equilibrium Exchange Rate; BEER; FEER; Cointegration; Global Imbalances;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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