How Robust are FEERs?

Rebecca Driver and Simon Wren-Lewis

Discussion Papers from University of Exeter, Department of Economics

Abstract: Fundamental Equilibrium Exchange Rates, or FEERs, are defined as the real exchange rate which would prevail if the economy were to be in internal and external equilibrium. As such they have been widely used both for policy purposes and as a method of calculating the level to which the real exchange rate might tend in the medium run. This paper addresses the issue of the sensitivity of FEERs to changes in the assumptions underlying these calculations. We quantify the sensitivity of the FEER calculations to various parameters and inputs, and show that in many cases the changes induced in the FEER are large.

Keywords: Fundamental; Equilibrium; Exchange; Rates (search for similar items in EconPapers)
JEL-codes: F00 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9606

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