Thousands of Beers: Take Your Pick

27 Pages Posted: 4 Oct 2017

See all articles by Konrad Adler

Konrad Adler

University of Bonn, Institute of Finance and Statistics

Christian Grisse

Swiss National Bank

Date Written: November 2017

Abstract

This paper explores the robustness of behavioral equilibrium exchange rate (BEER) models. We highlight the importance of model uncertainty, and employ real exchange rates computed from price‐level data to explore robustness to the inclusion of country fixed effects. The estimated coefficients—and therefore also the implied equilibrium values—are sensitive to the combination of variables included in the model, and to the inclusion of fixed effects. We identify several variables that exhibit a robust link with real exchange rates across specifications. Our findings can help policymakers in understanding the uncertainty associated with estimates of equilibrium exchange rates.

Suggested Citation

Adler, Konrad and Grisse, Christian, Thousands of Beers: Take Your Pick (November 2017). Review of International Economics, Vol. 25, Issue 5, pp. 1078-1104, 2017, Available at SSRN: https://ssrn.com/abstract=3047556 or http://dx.doi.org/10.1111/roie.12296

Konrad Adler (Contact Author)

University of Bonn, Institute of Finance and Statistics

Adenauerallee 24-26
Bonn, 53113
Germany

Christian Grisse

Swiss National Bank ( email )

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

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