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: Warsaw School of Economics

No 20, MF Working Papers from Ministry of Finance in Poland

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.

Pages: 14 pages
Date: 2014-06-04
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Journal Article: 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:ris:mfplwp:0020

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