A comparison of the BEER and Penn effect models via their applications on the valuation of the Renminbi

Zhang, Zhibai (2010): A comparison of the BEER and Penn effect models via their applications on the valuation of the Renminbi.

Abstract

The behavioral equilibrium exchange rate (BEER) and the Penn effect models are compared via their applications on the valuation of the Renminbi (RMB). The definition for the Penn effect model is provided. The differences and relations between the two models in various econometric method settings are listed and explained. The Penn effect model is concluded to be the more reasonable model in terms of the valuation of the RMB under the time-series and cross-section data settings. In addition, 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.

• Item Type: MPRA Paper
• Language: English
• 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

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