Real Equilibrium Exchange Rate in Colombia: Thousands of VEC Models Approach/Tipo de cambio de equilibrio real en Colombia: aproximación mediante miles de modelos VEC/Taux de change d'équilibre réel en Colombie: approximation à l'aide de miles de modèles VEC

Behavioral Equilibrium Exchange Rate (BEER) modelspropose a wide range of variables as potential drivers of equilibrium real exchange rates (ERER). This gives rise to model uncertainty issues due to the often drastic dependence and variability of ERER on aparticular set of chosen variables. We address this issue by estimating thousands of Vector Error Correction (VEC) specifications using Colombian data spanning from the first quarter of 2000 to the fourth quarter of 2019. Based on an extensive literature review, we employ thirty-five proxies categorized among five fixed groups of economic fundamentals that underlie the ERER: Indebtedness, Fiscal sector, Productivity, Terms-of-Trade, and Interest Rate Differentials. Our approach derives an empirical distribution of ERER that allows us to determine with greater certainty, among hundreds of plausible economic specifications, whether the real exchange rate is misaligned or in equilibrium.