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Economic convergence and the fundamental equilibrium exchange rate in Poland

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  • Rubaszek, Michał

Abstract

The paper presents an extended version of the fundamental equilibrium exchange rate model (FFER). By introducing potential output into the specification of the foreign trade equations of the partial equilibrium FEER model we show that, under some plausible assumptions, the calculated level of the equilibrium exchange rate is consistent with the estimates of the behavioral equilibrium exchange (BEER). Moreover, we indicate that including the terms of trade as an explanatory variable in a reduced-form BEER equation for the real exchange rate might lead to the indeterminacy of the parameter estimates. The proposed model is applied to analyze fluctuations of the Polish zloty. We show that the real appreciation of the zloty is to a largely an equilibrium phenomenon.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12910.

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Date of creation: Oct 2008
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Handle: RePEc:pra:mprapa:12910

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Keywords: Fundamental equilibrium exchange rate; current account; foreign trade;

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  1. Virginie Coudert & Cécile Couharde, 2002. "Exchange Rate Regimes and Sustainable Parities for CEECs in the Run-up to EMU Membership," Working Papers 2002-15, CEPII research center.
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  14. Bruha, Jan & Podpiera, Jirí, 2007. "Inquiries on dynamics of transition economy convergence in a two-country model," Working Paper Series, European Central Bank 0791, European Central Bank.
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Cited by:
  1. Sławomir Dudek & Tomasz Zając & Kamil Danielski & Magdalena Zachłod-Jelec & Paweł Kolski & Dawid Pachucki & Iwona Fudała-Poradzińska, 2012. "eMPF Econometric Model of Public Finance," Working Papers, Ministry of Finance in Poland 14, Ministry of Finance in Poland.
  2. Abdelghani, Echchabi & Osman, Sayid & Isares, Mahamad & Khalid, Sorhiran & Zulhilmi, Zulkifli, 2011. "The implementation of Gulf Dinar among the GCC member countries and its possible impacts," MPRA Paper 28245, University Library of Munich, Germany.
  3. Michal Adam & Witold Kozinski & Janusz Zielinski, 2013. "To what extent can central banks influence exchange rates with foreign exchange interventions? The case of Poland," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 279-291 Bank for International Settlements.
  4. Magdalena Osinska & Karolina Kluth, 2010. "Convergence of Greek Economy with the EU and Some Comparisons with Polish Experience," European Research Studies Journal, European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 139-156.
  5. Katarzyna Budnik & Michal Greszta & Michal Hulej & Oskar Krzesicki & Roza Lewinska & Karol Murawski & Michal Rot & Bartosz Rybaczyk, 2009. "An update of the macroeconometric model of the Polish economy NECMOD," National Bank of Poland Working Papers, National Bank of Poland, Economic Institute 64, National Bank of Poland, Economic Institute.

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