Given of the FEER model, as this indicator


Given that the exchange rates in manyindustrial and developing countries have shown substantial fluctuations overthe last decades, there has certainly been a considerable interest inidentifying the factors that have been the cause of these moves. An importantpart of this study is exactly this issue, the study of exchange rateequilibrium and the economic factors converging in the same direction.Two are the most important methods used forthe valuation of the exchange rate equilibrium influenced by various economicfactors. One method is that of the macroeconomic balance which calculates theexchange rate as being robust with the country’s economy as a whole, producingwith the production capacity and we calculate is as the core exchange rate(FEER).Certainly this model has been used in manyother studies over the years, and an elaboration and extension of this model isbrought from the authors Isard and Faruquee.

While an alternative model that alreadyincludes an econometric analysis of the exchange rate equilibrium behavior isthe BEER model. Through this model, we get an evasion indicator that isdifferent from that of the FEER model, as this indicator is related to thedeviation through the current exchange rate and the value resulting from theequilibrium estimated from the exchange rate and economic factors.The empirical literature tells us thatClark and MacDonald in 1999 used the many factorial method Johansen toconstruct the REER estimated by the BEER method for the US dollar, the Germanmark and the Japanese yen.

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Thedirect application of this model resulted in an indicator called the actualavoidance, the difference between the current exchange rate exchange and itsestimated level through the actual values ??of the economic factors.But given that the actual values ??of thesefactors can be divided into steady or long-term levels, it is more valuable tocalculate and total avoidance, which is the difference between the actual rateand the estimated value of the sustained or long-term values ??of economicfactors.The real exchange rate (RER) is consideredto be an important economic indicator and its importance has been estimatedsince after the Bretton Woods system collapse, where between differentcountries there cannot be equal prices of the basket of goods. As such, theexchange rate is seen as an indicator that measures the level ofcompetitiveness of a country.Exchange rate fluctuations, the appreciation and depreciation of the domestic currency against the foreign currency basket may be caused by the situation of several economic factors in the country, but also by a fluctuated exchange rate with course divergence, which certainly has an impact on the economic situation of the country and the business sector.

So this phenomenon is seen as a double bond.Unemployment is a big economic and social issue for eachcountry, especially for Albania since it is a country that comes from acentralized system where the state ensured full employment. During 2002-2009 Albania achieved a solid economic growth. Strongdomestic demand and support by significant flows of foreign direct investmentsaffected the fast pace of economic growth.The capita per GDP in nominal terms was more than doubled overthe period and there were also improvements in human development indicators. Albaniahas succeeded in different aspects like reducing government debt, tax revenuewas increased unemployment was lowered and dealing with a lower inflation.

 

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