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Has Trade Structure Any Importance in the Trasmission of Currency Shocks? An Empirical Application for Central and Eastern European Acceding Countries to Eu

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Author Info
Roberta De Santis (ISAE - Institute for Studies and Economic Analyses)

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Abstract

The object of this study is to assess the role of trade structure and firms pricing behaviour in the transmission of currency shocks across geographically close countries. The analysis will focus on identifying and comparing the degree of vulnerability to currency shocks of Central Eastern European Acceding countries (CEEACs) to EU. According to our results, data seem to suggest that, with an export similarity index of over 80 and low pass-through, the most vulnerable countries to a devaluation arising in Slovak Republic, Latvia and Estonia, respectively, are Czech Republic, Estonia, Hungary, Poland, Slovak Republic and Slovenia. Nevertheless, Slovenia, Hungary and Poland, having a very high pass-through and a high share of bilateral trade within a region, can actually limit the extent of beggar-thy neighbour effects while the opposite applies to the remaining countries. Furthermore, Estonia, Czech and Slovak Republic, are relatively less integrated with the EU. The lower trade integration with the EU might suggest that these countries, which significantly trade also with non EU countries, could be also somewhat more exposed to external demand shocks originating from third countries

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Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 43.

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Length: 44 pages
Date of creation: Apr 2004
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Handle: RePEc:isa:wpaper:43

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Related research
Keywords: Currency crises; Trade; Contagion;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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