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Abstract

We use a dynamic heterogeneous panel model to estimate real equilibrium exchange rates for advanced transition countries. Our method is based on out-of-sample estimations from middle-income and high-income countries, and we use a pooled mean group estimator. We find that exchange rates have converged in recent years in five transition countries (Czech Republic, Hungary, Poland, Slovakia, and Slovenia) with real equilibrium exchange rates expressed in the US dollars. However, we also find that the currencies of the transition countries studied are substantially overvalued if real effective exchange rates are used.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 29 (2005)
Issue (Month): 2 (June)
Pages: 144-162

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Handle: RePEc:eee:ecosys:v:29:y:2005:i:2:p:144-162

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Find related papers by JEL classification:

• C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
• F31 - International Economics - - International Finance - - - Foreign Exchange
• P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

References

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19. Zhang, Zhichao, 2001. "Real Exchange Rate Misalignment in China: An Empirical Investigation," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 80-94, March.
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