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Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members

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Author Info
Nikolaos Giannellis ()
Athanasios Papadopoulos

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Abstract

In this study, we attempt to examine the possibility of emergence of significant fluctuations of the exchange rates in the future for the candidate EMU countries. In doing so, we estimate the equilibrium rate of the nominal effective exchange rate for Poland, Hungary, Slovak Republic and Malta through the BEER and PEER approaches. While the PEER-based estimation implies a large misalignment rate for the Hungarian forint, the BEER-based analysis shows that the present exchange rates of the countries considered do not deviate significantly from their equilibrium rates. As a consequence, based on BEER analysis, we do not expect large fluctuations in the effective exchange rates among the currencies considered. Hence, the relevant effective exchange rates are expected to be relatively stable. As a matter of fact, the entry of those countries into EMU is not expected to weaken the stability of Euro. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11079-007-9040-x
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Publisher Info
Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 3 (July)
Pages: 307-326
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Handle: RePEc:kap:openec:v:18:y:2007:i:3:p:307-326

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Related research
Keywords: Exchange rate; Cointegration; BEER; PEER; C32; C51; C52; E52; F31;

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  1. Gianluca Salsecci & Antonio Pesce, 2008. "Long-term Growth Perspectives and Economic Convergence of CEE and SEE Countries," Transition Studies Review, Springer, vol. 15(2), pages 225-239, September. [Downloadable!] (restricted)
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