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Equilibrium Exchange Rates in Transition Economies

Author

Listed:
  • Lionel Halpern
  • Mr. Charles Wyplosz

Abstract

A stylized fact of the transition process is an early profound exchange rate depreciation followed by continuing real appreciation. Absent historical reference points, it is difficult to judge whether the real appreciation is threatening competitiveness. This paper interprets the stylized facts and offers estimates of the equilibrium real exchange rate based on an international comparison of dollar wages and on a study of the dynamics of real exchange rates in several transition economies. The results suggest that the process of real appreciation is a combination of a return to equilibrium following the early overshooting and equilibrium appreciation.

Suggested Citation

  • Lionel Halpern & Mr. Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 1996/125, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/125
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    Keywords

    WP; nominal exchange rate; rate of exchange; managed float; dollar wage; rate depreciation; rate appreciation; exchange rate regime; equilibrium exchange rates; undervalued exchange rate; inflation rate; Real exchange rates; Exchange rates; Wages; Inflation; Current account; Africa; Central and Eastern Europe; Asia and Pacific; Southeast Asia; Western Europe;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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