2/2005 Marit Hinnosaar, Hannes Kaadu and Lenno Uusküla. Estimating the equilibrium exchange rate of the Estonian kroon
Working Papers of Eesti Pank. No 2, 2005
The paper presents empirical estimations of the equilibrium exchange rate of the Estonian kroon. The behavioural equilibrium exchange rate (BEER) approach is used to analyse the dynamics of the real effective exchange rate in the time period from 1995 to 2002. The estimates range from a 15% undervaluation to a small overvaluation of the kroon in the beginning of the period and indicate a position close to equilibrium in 2002.
JEL Code: C22, F31
Key words: equilibrium exchange rate, BEER, cointegration, Estonia
* The authors of the paper would like to thank Reimo Juks, Martti Randveer, Aurelijus Dabušinskas, Balász Égert, David Mayes, Lúcio Vinhas de Souza and the participants of the seminars at Eesti Pank and the European Central Bank for their valuable comments.
Authors' e-mail addresses: marit [at] hinnosaar.net, hannes.kaadu [at] tukkk.fi, lenno.uuskyla [at] epbe.ee
The views expressed are those of the authors and do not necessarily represent the official view of Eesti Pank.
- 1. Empirical Estimates of the Equilibrium REER of the Estonian Kroon
- 2. REER Indexes in Estonia 1995Q1-2003Q1
- 3. BEER Approach to an Equilibrium Real Exchange Rate
- 3.1. Methodology
- 3.2. Data Description
- 3.3. Empirical Results
- 3.4. Equilibrium of Fundamentals and the Equilibrium Exchange Rate Calculation
- 4. Summary
- Appendix 1. Strengths and weaknesses of different price indices for the REER
- Appendix 2. Data sources for price indexes
- Appendix 3. Different REER indices
- Appendix 4. Estimations of the Balassa-Samuelson Effect
- Appendix 5. Acronyms
- Appendix 6. Relative productivity
- Appendix 7. Graphical description of data
- Appendix 8. Calculated equilibrium exchange rates
Estimating the Equilibrium Exchange Rate of the Estonian Kroon, Working Papers of Eesti Pank No 2, 2005 (PDF*)
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