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Exchange Rate Variability, Pressures and Optimum Currency Area Criteria: Lessons for the Central and Eastern European Countries

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Roman Horvath

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Abstract

This paper estimates the medium-term determinants of the bilateral exchange rate variability and exchange rate pressures for 20 developed countries in the 1990s. The results suggest that the optimum currency area criteria explain the dynamics of bilateral exchange rate variability and pressures to a large extent. Next, we predict exchange rate volatility and pressures for the Central and Eastern European Countries (CEECs). We find that the CEECs encounter exchange rate pressures at approximately the same level as the euro area countries did before they adopted the euro.

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File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2005_08.pdf
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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2005/08.

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Date of creation: Dec 2005
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Handle: RePEc:cnb:wpaper:2005/08

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Related research
Keywords: Euro Adoption; Exchange Rates; GMM; Optimum Currency Area.;

Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F31 - International Economics - - International Finance - - - Foreign Exchange
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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    Other versions:
  3. Francisco Maeso-Fernandez & Chiara Osbat & Bernd Schnatz, 2004. "Towards the estimation of equilibrium exchange rates for CEE acceding countries: methodological issues and a panel cointegration perspective," Working Paper Series 353, European Central Bank. [Downloadable!]
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    Other versions:
  5. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May. [Downloadable!] (restricted)
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  6. Jinyong Hahn & Jerry Hausman, 2002. "A New Specification Test for the Validity of Instrumental Variables," Econometrica, Econometric Society, vol. 70(1), pages 163-189, January. [Downloadable!] (restricted)
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  7. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April. [Downloadable!] (restricted)
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  14. Serrat, Angel, 2000. "Exchange Rate Dynamics in a Multilateral Target Zone," Review of Economic Studies, Blackwell Publishing, vol. 67(1), pages 193-211, January.
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