The Equilibrium Real Exchange Rate: Pros and Cons of Different Approaches with Application to Latvia

Baltic Journal of Economics 2014
Viktors Ajevskis, Ramune Rimgailaite, Uldis Rutkaste, Olegs Tkacevs

This paper studies various approaches to the equilibrium real effective exchange rate estimation, including structural and direct estimation approaches. It shows their strengths and weaknesses with application to the case of Latvia. Despite the approaches differing considerably in terms of their theoretical background and data used they all indicate that the real exchange rate of Latvia after appreciation during the boom years and subsequent adjustment afterwards remained close to its equilibrium level at the end of the sample period, namely at the end of 2010.

Keywords
BEER; FEER; Latvia; NATREX; SVAR
DOI
10.1080/1406099X.2014.993853
Hyperlink
http://www.tandfonline.com/doi/full/10.1080/1406099X.2014.993853

Ajevskis, V., Rimgailaite, R., Rutkaste, U., Tkacevs, O. The Equilibrium Real Exchange Rate: Pros and Cons of Different Approaches with Application to Latvia. Baltic Journal of Economics, 2014, Vol.14, Iss.1-2, pp.101-123. ISSN 1406-099X. e-ISSN 2334-4385. Available from: doi:10.1080/1406099X.2014.993853

Publication language
English (en)