Economic convergence and the fundamental equilibrium exchange rate in central and eastern Europe
AbstractThe paper presents an extended version of the fundamental equilibrium exchange rate model (FEER), which introduces potential output into foreign trade equations. We show that with this specification and under some plausible assumptions the equilibrium exchange rate is consistent with the behavioral equilibrium exchange model (BEER). We use the extended FEER model to analyze fluctuations of the real exchange rate in four central and eastern European countries. The resulting FEER calculations show that the appreciation of the real exchange rates in these countries in the past nine years is largely an equilibrium phenomenon.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 18 (2009)
Issue (Month): 5 (December)
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Web page: http://www.elsevier.com/locate/inca/620166
Fundamental equilibrium exchange rate Current account Foreign trade;
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