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Interpreting Real Exchange Rate Movements in Transition Countries

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  • International Monetary Fund

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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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/56.

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Length: 35
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/56

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  1. Kornélia Krajnyák & Jeromin Zettelmeyer, 1998. "Competitiveness in Transition Economies: What Scope for Real Appreciation?," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 309-362, June.
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  14. Égert, Balázs & Lommatzsch, Kirsten, 2004. "Equilibrium exchange rates in the transition: The tradable price-based real appreciation and estimation uncertainty," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 9/2004, Bank of Finland, Institute for Economies in Transition.
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