Temporal dimension and equilibrium exchange rate: A FEER/BEER comparison

Antonia Lòpez-Villavicencio, Jacques Mazier and Jamel Saadaoui
Authors registered in the RePEc Author Service: Antonia López Villavicencio

Emerging Markets Review, 2012, vol. 13, issue 1, 58-77

Abstract: This paper investigates the temporal links between two models of equilibrium exchange rate, namely the behavioral and the fundamental approaches. Our results show that, even though in the long-run they are closely related, important differences are observed for some countries and/or some periods. Contrary to previous contributions, we analyze the factors that explain this disconnection. We outline structural changes in matter of competitiveness, the dynamics of foreign assets and valuation effects as explanations. This novel evidence is important if the two approaches for assessing misalignments are used for policy decisions such as setting tariffs to cope with the “currency war”.

Keywords: Equilibrium exchange rate; Cointegration; Net foreign assets; Current account; Exchange rate (search for similar items in EconPapers)
JEL-codes: C23 F31 F32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (20)

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Related works:
Working Paper: Temporal dimension and equilibrium exchange rate: A FEER/BEER comparison (2012)
Working Paper: Temporal Dimension and Equilibrium Exchange Rate: a FEER / BEER Comparison (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:13:y:2012:i:1:p:58-77

DOI: 10.1016/j.ememar.2011.10.001

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