Sophie Béreau, Antonia Lopez Villavicencio & Valérie Mignon , 2008.
"Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: a Panel Smooth Transition Error Correction Modelling,"
CEPII Working Paper 2008- 23 , October 2008 , CEPII.
 We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium value (BEER) using a Panel Smooth Transition Regression model framework.We show that the real exchange rate convergence process in the long run is characterized by nonlinearities for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover, there exists an asymmetric behavior of the real exchange rate when facing an over- or an undervaluation of the domestic currency. Finally, our results suggest that the real exchange rate is unable to unwind alone global imbalances.
Equilibrium exchange rate ; BEER model ; Panel smooth transition regression ; Panel vector error correction model