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Interpreting real exchange rate movements in transition countries

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Author Info
Broeck, Mark De () (BOFIT)
Sløk, Torsten () (BOFIT)

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Abstract

Several transition countries have experienced strong real exchange rate appreciations. This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector. Using panel data over the period 1993–98, the results show clear evidence of productivity-driven exchange rate movements in the central and eastern European and Baltic countries. Transition countries, particularly the EU accession countries that have begun to catch up, can expect to experience further productivity-driven real exchange rate appreciations. Evidence from a large cross-section of non-transition countries indicates that catching up by one percent will be associated with a 0.4 percent real appreciation.

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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2001.

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Length: 46 pages
Date of creation: 26 Jul 2001
Date of revision:
Handle: RePEc:hhs:bofitp:2001_007

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Related research
Keywords: real exchange rates transition Balassa-Samuelson effects

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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Zoltán M. Jakab & Mihály András Kovács, 1999. "Determinants of Real Exchange Rate Fluctuations in Hungary," MNB Working Papers 1999/6, Magyar Nemzeti Bank (The Central Bank of Hungary). [Downloadable!]
  2. Kornelia Krajnyak & Jeromin Zettelmeyer, 1998. "Competitiveness in Transition Economies: What Scope for Real Appreciation?," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(2), pages 4. [Downloadable!] (restricted)
  3. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  4. Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," NBER Working Papers 4807, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Jacob A. Frenkel & Michael L. Mussa, 1985. "Asset Markets, Exchange Rates and the Balance of Payments," NBER Working Papers 1287, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Tamim Bayoumi & Peter Isard & Steven A. Symansky & Takatoshi Ito, 1996. "Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region," IMF Occasional Papers 145, International Monetary Fund.
  7. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers 0051, Econometric Society. [Downloadable!]
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  8. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April. [Downloadable!] (restricted)
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  9. Mark de Broeck & Vincent Koen, 2000. "The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union - A View from the Supply Side," IMF Working Papers 00/32, International Monetary Fund.
  10. Panagiotis Liargovas, 1999. "An Assessment of Real Exchange Rate Movements in the Transition Economies of Central and Eastern Europe," Post-Communist Economies, Taylor and Francis Journals, vol. 11(3), pages 299-318, September. [Downloadable!] (restricted)
  11. Lionel Halpern & Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 96/125, International Monetary Fund.
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