Advanced Search
MyIDEAS: Login

The Real Exchange Rate in Transition Economies

Contents:

Author Info

  • C Grafe
  • C Wyplosz

Abstract

Real exchange rates appear to present a specific behaviour in the early phase of transition: they are largely unaffected by nominal exchange rate movements and exibit trend appreciation. The model presented here describes the transition process as the emergence of two new (traded and non-traded good) sectors and the decline of an inefficient and subsidised state sector. The absence of financial markets means that firms accumulate capital through retained earnings. Labour markets are imperfect giving rise to a wage gap. The model shows that the real exchange rate plays the crucial role of determining real wages. Through real wages it sets the pace for the development of the new sectors as workers are attracted out of the state sector. The link between growth and real appreciation differs from the usual Balassa Samuelson effect. The paper also explores the role of labour market distortions and foreign financing.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cep.lse.ac.uk/pubs/download/DP0395.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0395.

as in new window
Length:
Date of creation: Jul 1998
Date of revision:
Handle: RePEc:cep:cepdps:dp0395

Contact details of provider:
Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Atkeson, Andrew & Kehoe, Patrick J, 1996. "Social Insurance and Transition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 377-401, May.
  2. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  3. Cornelli, F. & Portes, R. & Schaffer, M., 1996. "The Capital Structure of Firms in Central and Eastern Europe," DELTA Working Papers 96-05, DELTA (Ecole normale supérieure).
  4. Philippe Aghion & Olivier J. Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330 National Bureau of Economic Research, Inc.
  5. Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition Central Europe," NBER Working Papers 4736, National Bureau of Economic Research, Inc.
  6. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
  7. J. Konings & H. Lehmann & M.E. Schaffer, 1996. "Job Creation and Job Destruction in a Transition Economy: Ownership, Firm Size," CERT Discussion Papers 9611, Centre for Economic Reform and Transformation, Heriot Watt University.
  8. Castanheira, Micael & Roland, Gérard, 1996. "Restructuring and Capital Accumulation in Transition Economies: A General Equilibrium Perspective," CEPR Discussion Papers 1372, C.E.P.R. Discussion Papers.
  9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, January.
  10. Burda, Michael C, 1992. "Unemployment, Labour Market Institutions and Structural Change in Eastern Europe," CEPR Discussion Papers 746, C.E.P.R. Discussion Papers.
  11. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  12. Carlos A. Végh Gramont & Ratna Sahay & Guillermo Calvo, 1995. "Capital Flows in Central and Eastern Europe: Evidence and Policy Options," IMF Working Papers 95/57, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tomasz Mickiewicz & Anna Zalewska, 2002. "Deindustrialisation. Lessons from the StructuralOutcomes of Post-Communist Transition," William Davidson Institute Working Papers Series 463, William Davidson Institute at the University of Michigan.
  2. Francois Gurtner, 2002. "Currency Board and Debt Trap: Evidence from Argentina and Relevance for Estonia," CERT Discussion Papers 0204, Centre for Economic Reform and Transformation, Heriot Watt University.
  3. Lukasz Rawdanowicz, 2003. "The EMU Enlargement and the Choice of the Euro Conversion Rates: Theoretical and Empirical Issues," CASE Network Studies and Analyses 0269, CASE-Center for Social and Economic Research.
  4. Camille Baulant & Virginie Coudert & Michel Aglietta, 1999. "Compétitivité et régime de change en Europe centrale," Revue économique, Presses de Sciences-Po, vol. 0(6), pages 1221-1236.
  5. Wyplosz, Charles, 2000. "Ten years of transformation - macroeconomic lessons," Policy Research Working Paper Series 2288, The World Bank.
  6. Manzocchi, S. & Ottaviano, G.I.P., 1999. "Outsiders in Economic Integration: the Case of a Transition Economy," Economics Working Papers eco99/32, European University Institute.
  7. Fardmanesh, Mohsen & Tan, Li, 2003. "Wage and price control policies in transition economies," Journal of Development Economics, Elsevier, vol. 70(1), pages 173-200, February.
  8. Coricelli, Fabrizio & Jazbec, Bostjan, 2001. "Real Exchange Rate Dynamics in Transition Economies," CEPR Discussion Papers 2869, C.E.P.R. Discussion Papers.
  9. Dumitru, Ionut, 2008. "Efectul Balassa-Samuelson in Romania
    [Balassa-Samuelson effect in Romania]
    ," MPRA Paper 18611, University Library of Munich, Germany.
  10. Karsten Staehr, 2010. "Income convergence and inflation in Central and Eastern Europe : does the sun always rise in the East," Bank of Estonia Working Papers wp2010-04, Bank of Estonia, revised 22 Mar 2010.
  11. Ca' Zorzi, Michele & De Santis, Roberto A., 2003. "The admission of accession countries to an enlarged monetary union: a tentative assessment," Working Paper Series 0216, European Central Bank.
  12. Andrea Brasili & Bruno Sitzia, 2003. "Risk Related Non Linearities in Exchange Rates: Evidence from a Panel of Central and Eastern European Countries," Open Economies Review, Springer, vol. 14(2), pages 135-155, April.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0395. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.