Understanding the Behavioral Equilibrium Exchange Rate Model Via its Application to the Valuation of Chinese Renminbi

Zhang, Zhibai

doi:10.2139/ssrn.2120419

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Understanding the Behavioral Equilibrium Exchange Rate Model Via its Application to the Valuation of Chinese Renminbi

21 Pages Posted: 31 Jul 2012 Last revised: 31 Jul 2012

See all articles by Zhibai Zhang

Zhibai Zhang

Nanjing University of Finance and Economics - School of Finance

Date Written: January 15, 2010

Abstract

In this paper, the behavioral equilibrium exchange rate (BEER) model used in a time-series setting is investigated, via its application to the valuation of Chinese renminbi. A classical definition with its generalization is given. The different misalignment results derived from the BEER models are proven to result from the different econometric component choices. It is found that some of the misalignment results are consistent with Chinese economic facts, but some others are not. Finally, four main flaws unavoidable under the BEER model are given and analyzed.

Keywords: Behavioral equilibrium exchange rate, Chinese renminbi

JEL Classification: F31, F41

Suggested Citation: Suggested Citation

Zhang, Zhibai, Understanding the Behavioral Equilibrium Exchange Rate Model Via its Application to the Valuation of Chinese Renminbi (January 15, 2010). Available at SSRN: https://ssrn.com/abstract=2120419 or http://dx.doi.org/10.2139/ssrn.2120419