Sources of real and nominal exchange rate fluctuations in transition economies
AbstractThis paper provides an empirical inquiry into the sources of movements of the real and nominal exchange rates in Hungary and Poland for during the 1990:01-1998:02 period. We decompose the exchange rate movements into those attributable to real and nominal shocks, we find that (1) nominal shocks have played a significant role in Poland, but not in Hungary, in explaining real exchange rate movements during the transition period. Instead, real shocks have dominated real exchange movements in Hungary and (2) nominal shocks explain almost all of nominal exchange rate movements in Poland and a sizable portion of nominal exchange rate movements in Hungary. These results are compared with the findings of Lastrapes (1992) and Enders and Lee (1997) for industrial countries. Finally, policy implications of the empirical results as well their lessons for modeling exchange rates in transition economies are discussed.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1998-022.
Date of creation: 1998
Date of revision:
Publication status: Published in Journal of Compartive Economics as "Sources of Real Exchange Rate Fluctuations in Transition Economies: Evidence from Hungary and Poland."
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