Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs
IMF Working Papers, May 1, 1998
Source details
- Canonical URL
- Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs
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Bibliographic details
- Authors: Ronald MacDonald, Peter B. Clark
- Published: May 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451961683.001
Summary of purpose and approaches
- Compares two approaches for assessing whether a country’s actual real effective exchange rate is consistent with economic fundamentals:
- FEER approach: calculates the real exchange rate that equates the current account at full employment with sustainable net capital flows.
- BEER approach: uses econometric methods to establish a behavioral link between the real rate and relevant economic variables.
- An exchange rate model is estimated for the G-3 currencies to provide illustrative comparisons of BEERs and FEERs.
Key findings and analytical focus
- The paper presents a methodological comparison between FEERs and BEERs as tools for evaluating equilibrium real exchange rates.
- The G-3 exchange rate model is used to illustrate differences and similarities between BEER estimates and FEER calculations.
Subjects and keywords
- Subjects:
- Balance of payments
- Capital account
- Current account
- Exchange rates
- Foreign exchange
- Real effective exchange rates
- Real exchange rates
- Keywords:
- BEER analysis
- BEER estimate
- Capital account
- Current account
- equilibrium exchange rate
- Exchange rates
- FEER approach
- FEER calculation
- FEER exchange rate measure
- Real effective exchange rates
- Real exchange rates
- U.S. dollar
- WP
Content in this bundle
- Exchange Rates and Economic Funamentals: A Methodological Comparison of BEERs and Feers - WP/98/67