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Real convergence in Central and Eastern European EU Member States: which role for exchange rate volatility?

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  • Arratibel, Olga
  • Furceri, Davide
  • Martin, Reiner

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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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0929.

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Date of creation: Sep 2008
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Handle: RePEc:ecb:ecbwps:20080929

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Related research

Keywords: Catching-up; Convergence; credit; current account; EU; Exchange rate volatility; FDI; Growth;

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References

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Cited by:
  1. Michal SKOREPA, 2013. "Troubles in the Euro Area Periphery: The View through the Lens of a Simple Convergence-Sensitive Optimum Currency Area Index," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 129-151, May.
  2. Assoc. Prof. Anca Tãnasie Ph.D & Lect. Rãzvan Tudor Tãnasie PhD, 2011. "An Algorithm Based Approach For Romania’S Road Towards The Euro-Area Membership Status. In Search Of A Suitable Example," Revista Tinerilor Economisti (The Young Economists Journal), University of Craiova, Faculty of Economics and Business Administration, vol. 1(17), pages 133-140, November.
  3. Nikolay Nenovsky, 2009. "Monetary Regimes in Post-Communist Countries. Some Long-Term Reflections," Working paper series 12009en, Agency for Economic Analysis and Forecasting.

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