Equilibrium exchange rates in the transition: The tradable price-based real appreciation and estimation uncertainty
AbstractThis paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Poland, Slovakia and Slovenia. A theoretical model is developed that provides an explanation for the appreciation of the real exchange rate based on tradable prices in the acceding countries. Our model can be considered as a competing but also completing framework to the traditional Balassa-Samuelson model. With this as a background, alternative cointegration methods are applied to time series (Engle-Granger, DOLS, ARDL and Johansen) and to three small-size panels (pooled and fixed effect OLS, DOLS, PMGE and MGE), which leaves us with around 5,000 estimated regressions. This enables us to examine the uncertainty surrounding estimates of equilibrium real exchange rates and the size of the underlying real misalignments.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 9/2004.
Length: 63 pages
Date of creation: 10 Jun 2004
Date of revision:
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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
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real exchange rate; equilibrium exchange rate; tradable prices; transition; cointegration;
Other versions of this item:
- Balázs Égert & Kirsten Lommatzsch, 2004. "Equilibrium Exchange Rates in the Transition: The Tradable Price-Based Real Appreciation and Estimation Uncertainty," William Davidson Institute Working Papers Series 2004-676, William Davidson Institute at the University of Michigan.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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