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Robust Estimations of Equilibrium Exchange Rates within the G20: A Panel BEER Approach

26 Pages Posted: 15 Oct 2009  

Agnès Bénassy-Quéré

Paris School of Economics (University Paris 1)

Sophie Bereau

affiliation not provided to SSRN

Valérie Mignon

EconomiX-CNRS, University of Paris Ouest; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Date Written: 2009-03-31

Abstract

This paper is concerned with the robustness of equilibrium exchange rate estimations based on the BEER approach for a set of both industrial and emerging countries. The robustness is studied in four directions, successively. First, we investigate the impact of using alternative proxies for relative productivity. Second, we analyze the impact of estimating the equilibrium equation on one single panel covering G20 countries, or separately for G7 and non-G7 countries. Third, we measure the influence of the choice of the numeraire on the derivation of bilateral equilibrium rates. Finally, we study the temporal robustness of the estimations by dropping one or 2 years from the estimation period. Our main conclusion is that BEER estimations are quite robust to these successive tests, although at one point of time misalignments can differ by several percentage points depending on the methodology. The choice of the productivity proxy is the most sensible one, followed by the country sample. In contrast, the choice of the numeraire and the time sample have a relatively limited impact on estimated misalignments.

Suggested Citation

Bénassy-Quéré, Agnès and Bereau, Sophie and Mignon, Valérie, Robust Estimations of Equilibrium Exchange Rates within the G20: A Panel BEER Approach (2009-03-31). Scottish Journal of Political Economy, Vol. 56, Issue 5, pp. 608-633, November 2009. Available at SSRN: https://ssrn.com/abstract=1489069 or http://dx.doi.org/10.1111/j.1467-9485.2009.00500.x

Agnes Benassy-Quere (Contact Author)

Paris School of Economics (University Paris 1) ( email )

106-112 boulevard de l'Hopital
Paris, F-75013
France
+33 1 44 07 82 19 (Phone)

HOME PAGE: http://www.parisschoolofeconomics.com/benassy-quere-agnes/agnesb.html

Sophie Bereau

affiliation not provided to SSRN

Valérie Mignon

EconomiX-CNRS, University of Paris Ouest ( email )

200 Avenue de la République
Nanterre, Nanterre Cedex 92001
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

113 rue de Grenelle
Paris, F-75007
France

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