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Estimating the equilibrium exchange rate of the Estonian kroon

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Author Info
Marit Hinnosaar ()
Hannes Kaadu ()
Lenno Uusküla ()

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Abstract

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.

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File URL: http://www.eestipank.info/pub/en/dokumendid/publikatsioonid/seeriad/uuringud/_2005/_2_2005/_wp_205.pdf
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Publisher Info
Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2005-2.

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Length: 33 pages
Date of creation: 10 Oct 2005
Date of revision: 10 Oct 2005
Publication status: published
Handle: RePEc:eea:boewps:wp2005-02

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Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Phone: +3726680719
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Web page: http://www.bankofestonia.info
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Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
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Related research
Keywords: equilibrium exchange rate; BEER; cointegration; Estonia;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
F31 - International Economics - - International Finance - - - Foreign Exchange

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Broeck, Mark De & Sløk, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  2. MacDonald, Ronald, 2000. "Concepts to calculate equilibrium exchange rates : an overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  4. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of It," IMF Working Papers 97/21, International Monetary Fund.
  5. Søren Johansen, 1994. "The role of the constant and linear terms in cointegration analysis of nonstationary variables," Econometric Reviews, Taylor and Francis Journals, vol. 13(2), pages 205-229. [Downloadable!] (restricted)
  6. Nilsson, Kristian, 1999. "Alternative Measures of the Swedish Real Effective Exchange Rate," Working Paper 68, National Institute of Economic Research. [Downloadable!]
  7. Staff Team, 2003. "Competitiveness in the Baltics in the Run-Up to EU Accession," IMF Staff Country Reports 03/114, International Monetary Fund.
  8. Riedel, James, 1988. "The Demand for LDC Exports of Manufactures: Estimates from Hong Kong," Economic Journal, Royal Economic Society, vol. 98(389), pages 138-48, March. [Downloadable!] (restricted)
  9. Peter B. Clark & Ronald MacDonald, 1998. "Exchange Rates and Economic Fundamentals - A Methodological Comparison of BEERs and FEERs," IMF Working Papers 98/67, International Monetary Fund.
  10. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers 0051, Econometric Society. [Downloadable!]
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  11. Fischer, Christoph, 2002. "Real currency appreciation in accession countries: Balassa-Samuelson and investment demand," BOFIT Discussion Papers 8/2002, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  12. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  13. Virginie Coudert & Cecile Couharde, 2002. "Exchange Rate Regimes and Sustainable Parities for CEECs in the Run-up to EMU Membership," Working Papers 2002-15, CEPII research center. [Downloadable!]
  14. Hamid Faruqee & Martin Fetherston & Peter Isard & G. Russell Kincaid, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
  15. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211. [Downloadable!] (restricted)
  16. Hamid Faruqee, 1994. "Long-Run Determinants of the Real Exchange Rate - A Stock-Flow Perspective," IMF Working Papers 94/90, International Monetary Fund.
  17. Peter B. Clark & Ronald MacDonald, 2000. "Filtering the BEER - A Permanent and Transitory Decomposition," IMF Working Papers 00/144, International Monetary Fund.
    Other versions:
  18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  19. Reimo Juks, 2003. "The relationship between REER and trade flows in the context of the equilibrium exchange rate," Bank of Estonia Working Papers 2003-9, Bank of Estonia, revised 11 Nov 2003. [Downloadable!]
  20. Luca Buldorini & Stelios Makrydakis & Christian Thimann, 2002. "The effective exchange rates of the euro," Occasional Paper Series 02, European Central Bank. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bogoev, Jane & Bojceva Terzijan, Sultanija & Égert, Balázs & Petrovska, Magdalena, 2008. "Real Exchange Rate Dynamics in Macedonia: Old Wisdoms and New Insights," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(18), pages 1-19. [Downloadable!]
    Other versions:
  2. Lubos Komarek & Martin Melecky, 2005. "The Behavioural Equilibrium Exchange Rate of the Czech Koruna," Working Papers 2005/05, Czech National Bank, Research Department. [Downloadable!]
    Other versions:
  3. Rasmus Kattai, 2005. "EMMA - A Quarterly Model of the Estonian Economy," Bank of Estonia Working Papers 2005-12, Bank of Estonia, revised 12 Dec 2005. [Downloadable!]
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