Thousands of BEERs: Take your pick |
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Authors: | Konrad Adler Christian Grisse |
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Institution: | 1. Toulouse School of Economics, France;2. Swiss National Bank, Zürich, Switzerland |
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Abstract: | This paper explores the robustness of behavioral equilibrium exchange rate (BEER) models. We highlight the importance of model uncertainty, and employ real exchange rates computed from price‐level data to explore robustness to the inclusion of country fixed effects. The estimated coefficients—and therefore also the implied equilibrium values—are sensitive to the combination of variables included in the model, and to the inclusion of fixed effects. We identify several variables that exhibit a robust link with real exchange rates across specifications. Our findings can help policymakers in understanding the uncertainty associated with estimates of equilibrium exchange rates. |
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