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Sources of Real Exchange Rate Fluctuations in Central and Eastern Europe – Temporary or Permanent?

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  • Agnieszka Stazka

Abstract

This paper investigates, using the SVAR model of Clarida and Gali (1994), the sources of real exchange rate fluctuations in eight Central and East European new EU member states. Theoretically, one should expect the real exchange rates of Exchange Rate Mechanism II participants to be primarily driven by temporary shocks and those of ERM II “outs” by permanent shocks. Our results reveal an opposite pattern. We conclude that the sources of real exchange rate movements – and the usefulness of nominal exchange rates as shock absorbing instruments – were not the decisive factor behind these countries’ decisions concerning the ERM II participation.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1876.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1876

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Keywords: exchange rate fluctuations; Central and Eastern Europe; ERM II; SVAR;

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References

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  1. Richard Clarida & Jordi Gali, 1994. "Sources of real exchange rate fluctuations: how important are nominal shocks?," Proceedings, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Apr.
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Cited by:
  1. Mirdala, Rajmund, 2009. "Interest rate transmission mechanism of the monetary policy in the selected EMU candidate countries (SVAR approach)," MPRA Paper 14072, University Library of Munich, Germany.
  2. K. Rajmund MIRDALA, 2012. "Sources Of Exchange Rate Volatility In The European Transition Economies. Effects Of Economic Crisis Revealed," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(3(21)/ Fa), pages 270-282.
  3. Mirdala, Rajmund, 2009. "Shocking aspects of monetary integration (SVAR approach)," MPRA Paper 17057, University Library of Munich, Germany.
  4. Lubos Komarek & Michal Skorepa, 2013. "Sources of Asymmetric Shocks: The Exchange Rate or Other Culprits?," Working Papers, Czech National Bank, Research Department 2013/12, Czech National Bank, Research Department.

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