Explain the ways of estimating what an exchange rate is fairly worth over the long run

Fair value is where a currency should settle once cyclical noise fades. Purchasing power parity is the simplest anchor: real exchange rates tend to revert to their mean, so a currency that has risen in real terms looks overvalued. The macroeconomic balance approach estimates the exchange rate change needed to move the projected current account to its sustainable level. The external sustainability approach finds the rate that stabilises net foreign assets or liabilities at an acceptable share of GDP. Reduced-form econometric models regress the real exchange rate on fundamentals such as productivity and terms of trade. The trap is using these as timing tools: they describe a slow pull, and misalignments can last years.