Chapter 1: GSDEER—Re-Estimation and Test-Based Adjustment
We have updated our GSDEER model, while maintaining the same framework as before. The primary aim was
to re-estimate the coefficients on the basis of 11 additional quarters of new data, now covering the period from
1Q1980 to 4Q2008. In addition, we have adjusted the fixed effects for 12 countries using a cross-sectional link
between GDP per capita relative to the US and deviation from PPP. This kind of adjustment had previously
been used for CEE countries only. The new ‘fair value’ estimates have barely changed for most major
currencies; however, there are some notable shifts in EM. The Dollar remains broadly undervalued.