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Exchange Rates in the New EU Accession Countries

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  • Katerina Smídková
  • Ales Bulir

Abstract

Estimation and simulation of sustainable real exchange rates in some of the new EU accession countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued in 2003. Simulations, conditional on large-model macroeconomic projections, suggest that under current policies those currencies would be unlikely to stay within the ERM2 stability corridor during 2004-10. In-sample simulations for Greece, Portugal, and Spain indicate both a much smaller misalignment of national currencies prior to ERM2, and a more stable path of real exchange rates over the medium term than can be expected for the new accession countries.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/27.

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Length: 38
Date of creation: 01 Feb 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/27

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Keywords: Foreign direct investment; European Union; Real effective exchange rates; Foreign investment; exchange rate; exchange rates; real exchange rate; fdi; real exchange rates; direct investment; equilibrium exchange rate; exchange rate developments; real exchange rate appreciation; exchange rate appreciation; exchange rate stability; real exchange rate misalignment; exchange rate misalignment; exchange rate volatility; foreign assets; net foreign assets; nominal exchange rate; exchange rate regime; real exchange rate stability; exchange rate determination; real exchange rate volatility; flexible exchange rates; industrial countries; external financing; fluctuation margins; nominal exchange rates; exchange rate regimes; foreign exchange; foreign liabilities; exchange rate mechanism; foreign trade; dollar exchange rate; real exchange rate movements; macroeconomic adjustment; effective exchange rate; host country; international trade; foreign investors; current account balance; country exchange rate; exchange rate change; real exchange rate series; real effective exchange rate; fixed exchange rates; exchange rate correction; exchange rate policies; euro exchange rate; exchange rate movements; exchange rate fluctuations; floating exchange rates; foreign ? capital;

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Citations

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Cited by:
  1. Vít Bubák & Filip Žikeš, 2009. "Distribution and Dynamics of Central-European Exchange Rates: Evidence from Intraday Data," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(4), pages 334-359, Oktober.
  2. Nikolaos Giannellis & Athanasios Papadopoulos, 2007. "Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members," Open Economies Review, Springer, vol. 18(3), pages 307-326, July.
  3. Jorge Eduardo Carrera, 2008. "Tipo de cambio real de equilibrio como variable no observable," Investigación Conjunta - español, Centro de Estudios Monetarios Latinoamericanos, CEMLA, edition 1, volume 1, number 1-09 edited by Centro de Estudios Monetarios Latinoamericanos (CEMLA).
  4. Morris Goldstein, 2005. "What Might the Next Emerging-Market Financial Crisis Look Like?," Working Paper Series WP05-7, Peterson Institute for International Economics.
  5. Rubaszek, Michał, 2008. "Economic convergence and the fundamental equilibrium exchange rate in Poland," MPRA Paper 12910, University Library of Munich, Germany.
  6. Kolasa, Marcin, 2010. "Real convergence and its illusions," Working Paper Series 1231, European Central Bank.
  7. Fic, Tatiana & Barrell, Ray & Holland, Dawn, 2008. "Entry rates and the risks of misalignment in the EU8," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 761-774.
  8. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten Years of Inflation Targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, August.
  9. Przystupa, Jan, 2009. "Approaching a problem of the long-run real equilibrium exchange rate of Polish zloty while entering the ERM-2 and Euro zone," MPRA Paper 19549, University Library of Munich, Germany.
  10. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal Policy and its Sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek, August.
  11. García Solanes José, 2008. "Real Exchange Rate Appreciation in Central and Eastern European Countries. Why the Balassa-Samuelson Effect Does Not Explain the Whole Story," Working Papers 2010100, Fundacion BBVA / BBVA Foundation.

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