Is the Cyprus Pound Real Effective Exchange Rate Misaligned? A BEER Approach

Authors: Pattichis, Charalambos¹; Maratheftis, Marios²; Zenios, Stavros³

Source: International Economic Journal, Volume 21, Number 1, March 2007 , pp. 133-154(22)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This paper investigates whether the real effective exchange rate of the Cyprus pound is misaligned by generating measures of the equilibrium rate using the Behavioral Equilibrium Exchange Rate (BEER) approach. Several measures of the equilibrium exchange rate were derived and used to check for the existence of exchange rate misalignment. The results suggest that, during the 1990s, the actual real effective exchange rate and the various equilibrium measures generated move closely together and there is no evidence of any significant and persistent misalignment. However, the empirical evidence suggests persistent overvaluation during the 1980s.

Keywords: Equilibrium exchange rates; misalignment; Cyprus pound

Document Type: Research article

DOI: http://dx.doi.org/10.1080/10168730601181026

Affiliations: 1: Olayan School of Business, American University of Beirut, Lebanon 2: Standard Chartered Bank, London, UK 3: Department of Public and Business Administration University of Cyprus,

Publication date: 2007-03-01