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The Assesment of Equilibrium Real Echange Rate of Latvia

Author

Listed:
  • Viktors Ajevskis

    (Bank of Latvia)

  • Ramune Rimgailaite

    (Bank of Latvia)

  • Uldis Rutkaste

    (Bank of Latvia)

  • Olegs Tkacevs

    (Bank of Latvia)

Abstract

The aim of this study is to estimate the equilibrium REER of Latvia, which was done by using different methodologies, including IMF CGER approach, and the NATREX and SVAR models. The IMF methodology implies the application of three different methods: the macroeconomic balance method, the external sustainability method and the reduced-form equilibrium real exchange rate method. The results of all approaches used in this study 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, i.e. at end-2010.

Suggested Citation

  • Viktors Ajevskis & Ramune Rimgailaite & Uldis Rutkaste & Olegs Tkacevs, 2012. "The Assesment of Equilibrium Real Echange Rate of Latvia," Working Papers 2012/04, Latvijas Banka.
    • Handle: RePEc:ltv:wpaper:201204
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    References listed on IDEAS

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    4. Lucian Claudiu ANGHEL & Florina PINZARU & Mihaela DINU & Laurentiu-Mihai TREAPAT, 2014. "Fixing the Central Parity and the Evolution of the Currency within the Exchange Rate Mechanism II in the Countries that Joined the Euro Zone," Management Dynamics in the Knowledge Economy, College of Management, National University of Political Studies and Public Administration, vol. 2(4), pages 21-40, April.
    5. Comunale, Mariarosaria, 2018. "Current account and real effective exchange rate misalignments in Central Eastern EU countries: An update using the macroeconomic balance approach," Economic Systems, Elsevier, vol. 42(3), pages 414-436.
    6. Brankica Pažun & Zlatko Langović & Ana Langovic Milićević, 2016. "Equilibrium Real Exchange Rate Assessment of the Serbian Dinar: The MB approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 76-87, March.
    7. Mariarosaria Comunale, 2015. "Current Account and Reer Misalignments in Central Eastern EU Countries: an Update Using the Macroeconomic Balance Approach," Bank of Lithuania Working Paper Series 20, Bank of Lithuania.
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    More about this item

    Keywords

    equilibrium real exchange rate; BEER; macroeconomic balance; external sustainability; NATREX; SVAR; Latvia;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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