BEER tastes better in a panel of neighbours. On equilibrium exchange rates in CEE countries

Piotr Roszkowski, Kamila Sławińska and Andrzej Torój
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Piotr Roszkowski: Szkoła Główna Handlowa w Warszawie

Collegium of Economic Analysis Annals, 2014, issue 34, 209-226

Abstract: We follow the behavioural equilibrium exchange rate (BEER) approach to estimate the misalignments of real exchange rates in selected Central European countries, including Poland, in a sample that covers both pre- and post-crisis period. We add to the existing literature by applying a panel approach with FM‐OLS estimator of the cointegrating relationship that represents the BEER equation. In our quarterly sample, comprising the years 2000-2013 for Poland, Hungary, Czech Republic and Romania, the parameters of real interest rate disparity, risk premium, Harrod–Balassa–Samuelson effect and terms of trade take the expected sign. These estimates seem to be more precise and robust to post-crisis instability than those obtained on the basis of time series approach, at least for Poland.

Keywords: behavioral equilibrium exchange rate; FM‐OLS; panel cointegration; CEE exchange rates (search for similar items in EconPapers)
Date: 2014
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Working Paper: BEER tastes better in a panel of neighbours. On equilibrium exchange rates in CEE countries (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:annals:i:34:y:2014:p:209-226

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