Equilibrium Exchange Rates: a Guidebook for the Euro-Dollar Rate

Agnès Bénassy-Quéré (), Sophie Béreau () and Valérie Mignon ()

Working Papers from CEPII research center

Abstract: In this paper, we investigate different views of equilibrium exchange rates within a single, stock-flow adjustment framework. We then compare FEER and BEER estimations of equilibrium exchange rates based on the same, econometric model of the net foreign asset position, with special focus on the euro-dollar rate. These estimations suggest that, although more robust to alternative assumptions, the BEER approach may rely on excessive confidence on past behaviors in terms of portfolio allocation. Symmetrically, FEERs may underestimate the plasticity of international capital markets because they focus on the adjustment of the trade balance.

Keywords: Equilibrium exchange rates; euro-dollar; FEER; BEER; global imbalances (search for similar items in EconPapers)
JEL-codes: F31 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-ifn and nep-mon
Date: 2008-03
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Persistent link: http://EconPapers.repec.org/RePEc:cii:cepidt:2008-02

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