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Estimating the Equilibrium Effective Exchange Rate for Potential EMU members

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  • Nikolaos Giannellis

    ()
    (Department of Economics, University of Crete, Greece)

  • Athanasios Papadopoulos

    ()
    (Department of Economics, University of Crete, Greece)

Abstract

In this study, we attempt to examine the possibility of emergence of significant fluctuations of the exchange rates in the future for the candidate EMU countries. In doing so, we estimate the equilibrium rate of the nominal effective exchange rate for Poland, Hungary, Slovak Republic and Malta through the BEER and PEER approaches. While the PEER-based estimation implies a large misalignment rate for the Hungarian forint, the BEER-based analysis shows that the present exchange rates of the countries considered do not deviate significantly from their equilibrium rates. As a consequence, based on BEER analysis, we do not expect large fluctuations in the effective exchange rates among the currencies considered. Hence, the relevant effective exchange rates are expected to be relatively stable. As a matter of fact, the entry of those countries into EMU is not expected to weaken the stability of Euro.

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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0719.

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Length: 25 pages
Date of creation: 01 Dec 2005
Date of revision: 08 Mar 2007
Handle: RePEc:crt:wpaper:0719

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Keywords: Exchange rate - cointegration - BEER - PEER;

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Cited by:
  1. Gianluca Salsecci & Antonio Pesce, 2008. "Long-term Growth Perspectives and Economic Convergence of CEE and SEE Countries," Transition Studies Review, Springer, vol. 15(2), pages 225-239, September.

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