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Estimation of the equilibrium exchange rate: The CHEER approach

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  • Keblowski, Piotr
  • Welfe, Aleksander

Abstract

The paper presents the results of an investigation where the concept of a steady-state level of the exchange rate is equated with the capital market equilibrium based on the CHEER approach. The empirical analysis concentrates on Poland, because in this case the assessment of the equilibrium exchange rate is of vital importance. The prospect of the Polish currency joining the ERM2 provokes controversies and requires research into the economic consequences of accession to the EMU. The international transmission mechanisms affecting the Polish economy are identified within the VEqCM framework. The calculations indicate that in the last years of the analyzed sample (i.e. up to December 2006) the zloty/euro exchange rate was slightly overvalued, and the steady-state level was found to have been adjusting to the value of 4.1 zlotys.

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  • Keblowski, Piotr & Welfe, Aleksander, 2010. "Estimation of the equilibrium exchange rate: The CHEER approach," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1385-1397, November.
    • Handle: RePEc:eee:jimfin:v:29:y:2010:i:7:p:1385-1397
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    3. Piotr Karp, 2015. "Asymetryczny wpływ zmian kursu walutowego na gospodarkę Polski," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 6, pages 29-49.
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    6. Aleksander Welfe & Piotr Karp, 2017. "Makroekonometryczny miesięczny model gospodarki Polski WM-1," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 5-38.
    7. Adrian Marek Burda, 2022. "How Well Do Contemporary Theories Explain Floating Exchange Rate Changes in an Emerging Economy: The Case of EUR/PLN," Economies, MDPI, vol. 10(11), pages 1-20, November.
    8. Giannellis, Nikolaos & Koukouritakis, Minoas, 2013. "Exchange rate misalignment and inflation rate persistence: Evidence from Latin American countries," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 202-218.
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