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The monetary approach to exchange rates in the CEECs

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Author Info
Jesus Crespo-Cuaresma
Jarko Fidrmuc
Ronald MacDonald

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Abstract

A panel dataset for six Central and Eastern European countries (Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) is used to estimate the monetary exchange rate model with panel cointegration methods, including the Pooled Mean Group estimator, the Fully Modified Least Square estimator and the Dynamic Least Square estimator. The monetary model is able to convincingly explain the long-run exchange rate relationships of a group of CEECs, particularly when this is supplemented by a Balassa-Samuelson effect. Our estimated long-run monetary equations are used to compute equilibrium exchange rates. Finally, we discuss the implications for the accession of selected countries to the European Economic and Monetary Union. Copyright (c) 2005 The European Bank for Reconstruction and Development.

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Article provided by The European Bank for Reconstruction and Development in its journal The Economics of Transition.

Volume (Year): 13 (2005)
Issue (Month): 2 (04)
Pages: 395-416
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Handle: RePEc:bla:etrans:v:13:y:2005:i:2:p:395-416

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