An important concept is that there is no prior theory for the choice of economic variables hence, the choice of variables is based on economic intuition and data simplicity and availability.
The BEER model was developed by Clark and MacDonald (1999) and estimates the fair value of currencies according to short, medium and long-run determinants.
Abstract: In this article, we introduce another method for evaluating the ‘fair’ value of a currency: the Behavioural Equilibrium Exchange Rate (BEER), a model which is widely used in practice.
