Zhang, Zhibai (2012): A Comparison of the BEER and penn effect models via their applications in the Renminbi valuation. Published in: International Research Journal of Finance and Economics No. 97 (September 2012): pp. 138-154.
This is the latest version of this item.
Download (97Kb) | Preview
The behavioral equilibrium exchange rate (BEER) and the Penn effect models are compared via their applications on the valuation of the Renminbi (RMB). Considering the two models’ bases and applications, I conclude that, in time-series and cross-section data settings, the Penn effect model is the more reasonable or more robust model for currency valuation. In a panel data setting, the Penn effect model can be viewed as a special form of the BEER model; however, the latter includes many other forms that are different from the former. The criteria and methods of comparing different model findings are given and used to compare typical misalignment results on RMB derived from the two models. According to the misalignment classification comparison, each model’s findings from the BEER model are only partly reasonable but each model’s findings from the Penn effect model are wholly reasonable. Thus, the latter is more reasonable than the former.
|Item Type:||MPRA Paper|
|Original Title:||A Comparison of the BEER and penn effect models via their applications in the Renminbi valuation|
|Keywords:||Behavioral equilibrium exchange rate model; Penn effect model; Absolute purchasing power parity; Chinese renminbi|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Zhibai Zhang|
|Date Deposited:||02. Oct 2012 19:53|
|Last Modified:||20. Feb 2013 00:37|
 Baffes, J., Elbadawi, I., O’Connell, S., 1997. Single-equation Estimation of the Equilibrium Real Exchange Rate. Policy Research Working Paper No. 1800, World Bank.
 Balassa, B., 1964. The Purchasing-power Parity Doctrine : a Reappraisal. Journal of Political Economy 72(6), 584–596.
 Bergin, P., Glick, R., Taylor, A., 2006. Productivity, Tradability, and the Long-run Price Puzzle. Journal of Monetary Economics 53(8), 2041–2066.
 Bhagwati, J., 1984. Why are Services Cheaper in the Poor Countries? Economic Journal 94(374), 279-286.
 Broda, C., 2006. Exchange Rate Re gimes and National Price Levels. Journal of International Economics 70(1), 52–81.
 Chang, G., Shao, Q., 2004. How much is the Chinese Currency Undervalued? A Quantitative Estimation. China Economic Review 15(3), 366-371.
 Cheung, Y., Chinn, M., Fujii, E., 2007. The Overvaluation of Renminbi Undervaluation. Journal of Internat ional Money and Finance 26(5), 762-785.
 Cheung, Y., Chinn, M., Fujii, E., 2010. Measuring Renminbi Misalignment: where do We Stand? Korea and the World Economy 11(2), 263-296.
 Clark, P., MacDonald, R., 1998. Exchange Rates and Economic Fundamentals: a Methodological Comparison of BEERs and FEERs. Working Paper No. 98/67, International Monetary Fund.
 Coudert, V., Couharde, C., 2007. Real Equilibrium Exchange Rate in China: is the Renminbi Undervalued? Journal of Asian Economics 18(4), 568–594.
 Dunaway, S., Leigh, L., Li, X., 2006. How Robust are Estimates of Equ ilibrium Real Exchange Rates: the Case of China. Working Paper No. 06/220, International Monetary Fund.
 Dunaway, S., Li, X., 2005. Estimating China’s Equilibrium Real Exchange Rate. Working Paper No. 05/202, International Monetary Fund.
 Égert, B., Halpern, L., MacDonald, R., 2006. Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues. Journal of Economic Surveys 20(2), 257-324.
 Frankel, J., 2005. On the Renminbi: the Choi ce between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate. Working Paper No. 11274, National Bureau of Economic Research.
 Funke, M., Rahn, J., 2005. Just how Undervalued is the Chinese Renminbi? World Economy 28(4), 465-489.
 Garroway, C., Hacibedel, B., Reisen, H., Turkisch, E., 2012. The Renminbi and Poor-country Growth. World Economy 35(3), 273-294.
 Goh, M., Kim, Y., 2006. Is the Chinese Renminbi Undervalued? Contemporary Economic Policy 24(1), 116-126.
 Kravis, I., Lipsey, R., 1982. Towards an Explanation of National Price Levels. Working Paper No. 1034, National Bureau of Economic Research.
 Lopez-villavicencio, A., Mazier, J., Saadaoui, J., 2012. Temporal Dimension and Equilibrium Exchange Rate: a FEER/BEER Comparison. Emerging Markets Review 13(1), 58–77.
 Meese, R.A., Rogoff, K., 1983. Empirical Exchange Rate Models of the Seventies: do They Fit out of Sample? Journal of International Economics 14 (1-2), 3-24.
 Rogoff, K., 1996. The Purchasing Power Parity Puzzle. Journal of Economic Literature 34(2), 647-668.
 Samuelson, P., 1964. Theoretical Notes on Trade Problems. Review of Economics and Statistics 46(2), 145-154.
 Samuelson, P. 1994. Facets of Balassa-Samuelson Thirty Years Later. Review of International Economics 2(3), 201–226.
 Summers, R., Heston, A., 1991, The Penn World Table (Mark 5): an Expanded Set of International Comparisons, 1950-1988. Quarterly Journal of Economics 106 (2), 327-368.
 Wang, Y., Hui, X., Soofi, A., 2007. Estimating Renminbi (RMB) Equilibrium Exchange Rate. Journal of Policy Modeling 29(3), 417-429.
 Wu, N., Chen, Q., 2002. Studies of the RMB Exchange Rate (revision). China Finance Press, Beijing. Published in Chinese.
 Xu, Y., 2000. China’s Exchange Rate Policy. China Economic Review 11(3), 262-277.
 Zhang, Z., 2012. A Simple Model and Its Applica tion in the Valuation of Eleven Main Real Exchange Rates. International Research Journal of Finance and Economics (97),55-59.
 Zhang, Z., 2001. Real Exchange Rate Misalignment in China: an Empirical In vestigation. Journal of Comparative Economics 29(1), 80-94.
Available Versions of this Item
A comparison of the BEER and Penn effect models via their applications on the valuation of the Renminbi. (deposited 14. Aug 2012 04:35)
- A Comparison of the BEER and penn effect models via their applications in the Renminbi valuation. (deposited 02. Oct 2012 19:53) [Currently Displayed]