Real convergence in Central and Eastern European EU member states - which role for exchange rate volatility?

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Real convergence in Central and Eastern European EU member states - which role for exchange rate volatility?

Author Info

Olga Arratibel () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
Reiner Martin () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
Davide Furceri () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)

Additional information is available for the following registered author(s):

Abstract

This paper analyzes the relation between exchange rate volatility and several macroeconomic variables, namely real per capita output growth, the credit cycle, the stock of inward foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member States. Using panel estimations for the period between 1995 and 2006, we find that lower exchange rate volatility is associated with higher growth (for relatively less financially developed economies), higher stocks of FDI (for relatively more open economies), higher current account deficits, and a more volatile development of the credit to GDP ratio. JEL Classification: F3, F4, F5.

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Paper provided by European Central Bank in its series Working Paper Series with number 929.

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Length: 39 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ecb:ecbwps:20080929

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This paper has been announced in the following NEP Reports:

NEP-ALL-2008-10-07 (All new papers)
NEP-CBA-2008-10-07 (Central Banking)
NEP-EEC-2008-10-07 (European Economics)
NEP-IFN-2008-10-07 (International Finance)
NEP-OPM-2008-10-07 (Open MacroEconomics)
NEP-TRA-2008-10-07 (Transition Economics)

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