Assessing equilibrium exchange rates in CEE acceding countries : can we have DEER with BEER without FEER? : A critical survey of the literature

Abstract

The ambition of this paper is to provide a thorough overview of equilibrium exchange rates in the acceding countries of Central and Eastern Europe.Therefore, theoretical models of equilibrium exchange rates are reviewed first and presented in a structured way.Subsequently, the existing body of the empirical literature aimed at investigating real exchange rate determination and possible misalignments is analyzed in a systematic manner.Finally, an attempt is made to sum up where we stand at the moment and what the major shortcomings of the approaches currently used in the literature are.