WASET
	%0 Journal Article
	%A Pavla Ruzickova and  Petr Teply
	%D 2012
	%J International Journal of Economics and Management Engineering
	%B World Academy of Science, Engineering and Technology
	%I Open Science Index 65, 2012
	%T Methods of Estimating the Equilibrium Real Effective Exchange Rate (REER)
	%U https://publications.waset.org/pdf/2500
	%V 65
	%X There are many debates now regarding undervalued
and overvalued currencies currently traded on the world financial
market. This paper contributes to these debates from a theoretical
point of view. We present the three most commonly used methods of
estimating the equilibrium real effective exchange rate (REER):
macroeconomic balance approach, external sustainability approach
and equilibrium real effective exchange rate approach in the reduced
form. Moreover, we discuss key concepts of the calculation of the
real exchange rate (RER) based on applied explanatory variables:
nominal exchange rates, terms of trade and tradable and non-tradable
goods. Last but not least, we discuss the three main driving forces
behind real exchange rates movements which include terms of trade,
relative productivity growth and the interest rate differential.
	%P 949 - 952