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Would Fast Sailing Towards The Euro Be Smooth? What Fundamental Real Exchange Rates Tell Us Author info | Abstract | Publisher info | Download info | Related research | Statistics Kateřina Šmídková
Aleš Bulíř
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Computed fundamental real exchange rates in four new EU members point to difficulties in jointly entering the ERM II soon after the EU entry. Three currencies out of the four were overvalued prior to EU entry. Computations suggest that it is unlikely that the Czech, Hungarian and Polish economies will maintain low inflation during 2004 - 2010 and at the same time keep their currencies within the ERM II easily. Moreover, the experience of Greece, Portugal and Spain - viewed through fundamental real exchange rate goggles - indicates more stable real exchange rate paths and smaller currency misalignments prior to euro adoption than can be expected from the newcomers in the forthcoming years. If the newcomers sail too fast towards the euro, their sailing may not be as smooth as that of the front runners.
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Article provided by University of Economics, Prague in its journal Prague Economic Papers .
Volume (Year): 2005 (2005)
Issue (Month): 4 ()
Pages: 291-316
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Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:4:id:267:p:291-316Contact details of provider: Postal: nam. W. Churchilla 4, 130 67 Praha 3 Phone: (02) 24 09 51 11 Fax: (02) 24 22 06 57 Web page: http://www.vse.cz/ More information through EDIRC
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Keywords: fundamental real exchange rates ; foreign direct investment ; euro ; acceding economies ; Other versions of this item:
Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation
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