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Real Exchange Rate Dynamics and Output Contraction under Transition

Author

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  • Christos Papazoglou

    (Bank of Greece, Economic Research Department and Panteion University)

Abstract

Two major stylized facts that emerged during the early transition experience of the economies of Central and Eastern Europe were the fall in output and the appreciation of the real exchange rate. In this paper, we attempt to give a theoretical explanation, beyond that found in the existing literature, for the emergence of these two facts, which relies on the role of two basic characteristics of these economies in the early stages of transition. The first refers to their structure involving the existence of an almost liberalized price system for domestic output, a large part of which, however, was still produced by state firms and the second to the nature of the disturbances they initially encountered.

Suggested Citation

  • Christos Papazoglou, 2005. "Real Exchange Rate Dynamics and Output Contraction under Transition," Working Papers 29, Bank of Greece.
    • Handle: RePEc:bog:wpaper:29
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    References listed on IDEAS

    as
    1. Saul Estrin, 2002. "Competition and Corporate Governance in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 101-124, Winter.
    2. Jan Svejnar, 2002. "Transition Economies: Performance and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 3-28, Winter.
    3. Papazoglou, Christos & Pentecost, Eric J., 2004. "The dynamic adjustment of a transition economy in the early stages of transformation," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 547-561, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Hans Genberg, 2006. "Exchange-rate arrangements and financial integration in East Asia: on a collision course?," International Economics and Economic Policy, Springer, vol. 3(3), pages 359-377, December.
    2. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece.
    3. John Williamson, 2006. "A worldwide system of reference rates," International Economics and Economic Policy, Springer, vol. 3(3), pages 341-352, December.
    4. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece.
    5. P. Swamy & George Tavlas, 2007. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 293-306, May.
    6. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.

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    More about this item

    Keywords

    Transition economies; real exchange rate dynamics; output decline; structural reform; price liberalization.;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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