Temporal Dimension and Equilibrium Exchange Rate

CEPN Working Papers No. 2010-14

21 Pages Posted: 26 Sep 2011 Last revised: 13 Nov 2017

See all articles by Antonia López-Villavicencio

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Jacques Mazier

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Jamel Saadaoui

University of Strasbourg

Date Written: December 15, 2010

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.

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

JEL Classification: F31, F32, C23

Suggested Citation

López-Villavicencio, Antonia and Mazier, Jacques and Saadaoui, Jamel, Temporal Dimension and Equilibrium Exchange Rate (December 15, 2010). CEPN Working Papers No. 2010-14. Available at SSRN: https://ssrn.com/abstract=1933263 or http://dx.doi.org/10.2139/ssrn.1933263

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Jacques Mazier

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

UMR7115
Université Paris-Nord
Paris XIII
France

Jamel Saadaoui (Contact Author)

University of Strasbourg ( email )

61 Avenue de la Forêt Noire
Strasbourg, Alsace 67000
France

HOME PAGE: http://www.jamelsaadaoui.com/

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