Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers

Clark, Peter B.; MacDonald, Ronald

doi:10.1007/978-94-011-4411-7_10

Cited by 327 publications

(383 citation statements)

References 14 publications

Supporting

Mentioning

345

Contrasting

Unclassified

Order By: Relevance

“…As before, the steady state is required to be dynamically stable. Hence, shocks that cause the RER to diverge from its equilibrium in the short-run should, in the absence of any new shocks, produce eventual convergence to equation 5. Keeping in mind the possibility of signi…cant cross-country residual correlations, OLS may not be e¢ cient and the use of seemingly unrelated regression equations (SURE) estimations to improve e¢ ciency is preferred.…”

Section: Econometric Speci…cation and Methodsologymentioning

confidence: 99%

“…Broadly speaking, most researchers agree with Nurkse's (1945) de…nition of the LRER, but di¤er on what constitutes the best choice of determinants and empirical approach. 5 In principle, changes in RER can be captured in many ways: using traditional single-equation reduced-form model (Edwards, 1989(Edwards, , 1994; Razin and Collins, 1997), by using cointegrating equations (Elbadawi, 1994 This paper focuses on the behaviour of the real e¤ective exchange rate (REER) within the CFA Franc zone of Africa which has been in existence since 1948, and is currently made up of fourteen di¤erent mainly former French colonies that have come together to form two monetary unions. The …xed parity with the French Franc has been adjusted only once in January of 1994 through a 100% collective devaluation.…”

Section: Introductionmentioning

confidence: 99%

“…The trade-elasticities approach de…nes the RER as the price of imports or export divided by the CPI and for a desired current account level, the level of depreciation necessary can be computed. 5 Nurkse, R. (1945) de…nes the LRER as that value of the RER consistent with external and internal balance conditioning on speci…ed values of other variables that may in ‡uence these balances. Also see Edwards (1989) for a more recent deposition.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Estimating Equilibrium Real Exchange Rates in the Franc Zone

Coleman

2008

Journal of African Economies

View full text Add to dashboard Cite

In the CFA Franc zone of sub-Saharan Africa, the collective devaluation in 1994 remains the most important incident in its history. It sought to put an end to the worsening overall macroeconomic position of the zone. Using seemingly unrelated regression equations (SURE) analysis, this paper estimates the real e¤ective exchange rate and degree of misalignment in 12 Franc zone countries over the period 1960-99, allowing for contemporaneous error covariance due to observed cross-sectional dependence. The evidence suggests some signi…cant di¤erences among member states, however the largest economies -Cameroon, Côte d'Ivoire and Senegal -showed some striking similarities: just prior to the devaluation, they were much more overvalued relative to the smaller member states, most of which were either only marginally misaligned or virtually in equilibrium. In 1994, only Côte d'Ivoire is exactly in equilibrium as a result of the devaluation. Analysis of the post-1994 period suggests that some challenges lie ahead for the Franc zone, if …xed parity is to be maintained.

show abstract

Section: Econometric Speci…cation and Methodsologymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Estimating Equilibrium Real Exchange Rates in the Franc Zone

Coleman

2008

Journal of African Economies

View full text Add to dashboard Cite

show abstract

“…11 In general, estimates of the REER are based on the following approaches: Purchasing Power Parity (PPP), Fundamental Equilibrium Exchange Rate (FEER), and Behavioral Equilibrium Exchange Rate (BEER). See williamson (1983), Rogoff (1996), Clark and MacDonald (1998) and Montiel (1999). Related to the PPP theory see also the Balassa-Samuelson effect in Balassa (1964) and Samuelson (1964).…”

Section: Chinese Foreign Exchange Policymentioning

confidence: 99%

The impact of the Chinese exchange policy on foreign trade with the European Union

Cardoso

Duarte

2017

Brazil. J. Polit. Econ.

View full text Add to dashboard Cite

The aim of this paper is to analyze the impact of the Chinese foreign exchange policy on foreign trade with the European Union. After describing the importance of the exchange rate in an open economy and some of the methodologies employed to calculate its equilibrium value, we examine whether the Chinese competitiveness is due to the existence of misalignment (undervaluation) of its exchange rate, or rather, to other sources of competitiveness. For this purpose, we use a Vector Error Correction (VEC) model to estimate a long-run exports equation. The empirical results indicate that over the past few years, Chinese exports have benefited from an “unfair” competitive advantage resulting from the manipulation of its currency value.

show abstract

“…However, among the different empirical approaches, three methodologies are most common: (1) the "Fundamental Equilibrium Exchange Rate (FEER)", as in Williamson (1994) [20]; (2) the "Behavioural Equilibrium Exchange Rate (BEER)" approach developed by Clark and MacDonald [4]; and (3) the « Natural Rate of Exchange (NATREX) » approach, as in Stein [19] .…”

Section: Literature Reviewmentioning

confidence: 99%

Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015

Yahia¹,

Djeddi²,

Louafi³

2017

JFE

View full text Add to dashboard Cite

The aim of this paper is to estimate the long-run Equilibrium Real Exchange Rate (ERER) path using VECM approach, and assesses the degree of misalignment in Algeria. Based on annual data from 1980 to 2015, our results show that the macroeconomic variables such as terms of trade, trade openness, differential productivity with trading partners (Balassa-Samuelson effect), real price of oil, and government expenditures, plays significant role in determining the equilibrium of Algeria's ERER, the results also reveal that Algerian economy suffered from RER misalignment. As finding, and according to the Edwards' [6] Model and the Cashin's [2] model, results showed same evidences that there are three episodes of undervaluation of the Algerian dinar's and also three episodes of overvaluation, the seventh episode (2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015) shows that the Actual ERER appears to have been close to its estimated equilibrium.

show abstract

Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers

Cited by 327 publications

References 14 publications

Estimating Equilibrium Real Exchange Rates in the Franc Zone

Estimating Equilibrium Real Exchange Rates in the Franc Zone

The impact of the Chinese exchange policy on foreign trade with the European Union

Estimating the Equilibrium Real Exchange Rate in Algeria during the period: 1980-2015

Contact Info

Product

Resources

About