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N° 2008-01 |
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| March 2008 |
| How Robust are Estimated Equilibrium Exchange Rates? A Panel BEER Approach |
Agnès Bénassy-Quéré
Sophie Béreau
Valérie Mignon |
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| This paper is concerned with the robustness of equilibrium exchange rate estimations based on the BEER approach for a set of both industrial and emerging countries. The robustness is studied in four directions, successively. First, we investigate the impact of using alternative proxies for relative productivity. Second, we analyze the impact of estimating the equilibrium equation on one single panel covering G20 countries, or separately for G7 and non-G7 countries. Third, we measure the influence of the choice of the numeraire on the derivation of bilateral equilibrium rates. Finally, we study the temporal robustness of the estimations by dropping one or two years from the estimation period. Our main conclusion is that BEER estimations are quite robust to these successive tests, although at one point of time misalignments can differ by several percentage points depending on the methodology. The choice of the productivity proxy is the most sensible one, followed by the country sample. In contrast, the choice of the numeraire and the time sample have a relatively limited impact on estimated misalignments. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Equilibrium exchange rates; BEER; productivity; panel cointegration |
Keywords |
| F31; C23 |
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