Determinants of the Euro Real Effective Exchange Rate: A Beer/Peer Approach

By Francisco Maeso-Fernández, C. Osbat, Bernd Schnatz. Social Science Research Network, 2001

187 citations recorded by the source corpus.

This paper presents an empirical analysis of the medium-term determinants of the euro effective exchange rate. The empirical analysis builds on synthetic quarterly data from 1975 to 1998, and derives a Behavioural Equilibrium Exchange Rate (BEER) and a Permanent Equilibrium Exchange Rate (PEER). Four different model specifications are retained, due to the difficulties encountered in specifying an encompassing model. Results indicate that differentials in real interest rates and productivity, and (in some specifications) the relative fiscal stance and the real price of oil, have a significant influence on the euro effective exchange rate. Assessing the existence and the extent of the over- or undervaluation of the exchange rate is not straightforward, since these different specifications often lead to contrasting findings. However, all four models point unambiguously to the undervaluation of the euro in 2000, although the extent of this undervaluation largely depends on the specification chosen.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e6654da67034d883f88fddf606b935695e196727

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive? (2004, unknown): “See Morgan Stanley (Fels and Yilmaz, 2001), Bundesbank (Clostermann and Schnatz, 2000), ECB (Maeso-Fernandez et al., 2001), and IMF (Alberola, et al.”
Towards the Estimation of Equilibrium Exchange Rates for CEE Acceding Countries: Methodological Issues and a Panel Cointegration Perspective (2004, methodology): “Moreover, while certainly a key variable from a standard theoretical point of view, previous work on bilateral euro exchange rates and the effective exchange rate suggested that net foreign assets may lead to inconclusive evidence (see Maeso-Fernandez et al. 2001).”
Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive? (2003, unknown): “See Morgan Stanley (Fels and Yilmaz, 2001), Bundesbank (Clostermann and Schnatz, 2000), ECB (Maeso-Fernandez et al., 2001), and IMF (Alberola, et al., 1999).”
Just How Undervalued is the Chinese Renminbi (2005, unknown): “Maesco-Fernandez et al. (2001) focus on the euro-dollar exchange rate.”
A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation (2005, unknown): “One prominent example a study utilizing this approach is Maeso-Fernandez et al. (2002). They find that a one- percentage-point change in the productivity differential results in a four to five-percent real appreciation of the euro.”
The Impact of Oil Price Shocks on the Economic Growth of Selected MENA1 Countries (2010, background): “For example, when oil prices increased, Amano and Van Norden (1995) found appreciation for Germany, Japan, and the US, however, Maeso-Fernandez et al. (2002), Jiménez-Rodríguez and Sánchez (2005) and Chen and Chen (2007) showed that a rise in real oil prices led to a depreciation of the real…”
Concepts of equilibrium exchange rates (2005, background): “Stein (1994) defines the NATREX as ‘the rate that ___________________________________________________________________________ (67) Other examples of PEER estimates include Alberola et al (1999), Hansen and Roeger (2000) and Maeso-Fernandez et al (2001).”