The Concepts of Equilibrium Exchange Rate: A Survey of Literature

The aim of this paper is to review and examine a collection of ‘most commonly applied’ theoretical and empirical models of equilibrium exchange rate. The presentation on each model starts with an introduction of core theoretical frameworks. It will then be followed by discussions on relevant empirical steps to estimate the equilibrium rate. The rest of the paper will focus on assessing the strengths and weaknesses of the model and how each relates to the other.