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Real Exchange Rates in Transition Economies

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  • Boštjan Jazbec

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Abstract

Paper attempts to develop a model suitable for an analysis of the real exchange rate determination in transition economies. The main distinction from other approaches to the real exchange rate determination is an introduction of the pre-transition period which enables one to separately examine the role of adverse initial conditions and labor market reallocation between the tradable and non-tradable good sectors believed to characterize the extent of structural reforms in transition economies. Empirical findings seem to confirm that transition - when looking only at the real exchange rate behavior - is over once the progress in structural reforms does not affect the real exchange rate determination relative to other factors. Along the lines of research on growth prospects in transition economies, the effect of structural changes on the real exchange rate in more advanced transition economies has on average diminished in the fifth year of the transition process. The results for less advanced economies are in line with other studies on transition.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 482.

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Length: 53 pages
Date of creation: 01 Jul 2002
Date of revision:
Handle: RePEc:wdi:papers:2002-482

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Keywords: transition economies; real exchange rate; fixed-effects model;

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References

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  1. Brada, Josef C., 1998. "Introduction: Exchange Rates, Capital Flows, and Commercial Policies in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 613-620, December.
  2. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
  3. Anthony J. Richards & Gunnar Tersman, 1995. "Growth, Nontradables, and Price Convergence in the Baltics," IMF Working Papers 95/45, International Monetary Fund.
  4. Lionel Halpern & Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 96/125, International Monetary Fund.
  5. Jeromin Zettelmeyer & Günther Taube, 1998. "Output Decline and Recovery in Uzbekistan," IMF Working Papers 98/132, International Monetary Fund.
  6. Ratna Sahay & Jeromin Zettelmeyer & Eduardo Borensztein & Andrew Berg, 1999. "The Evolution of Output in Transition Economies," IMF Working Papers 99/73, International Monetary Fund.
  7. Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(2), pages 45-66, Spring.
  8. Sharmini Coorey & Mauro Mecagni & Erik Offerdal, 1996. "Disinflation in Transition Economies," IMF Working Papers 96/138, International Monetary Fund.
  9. 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.
  10. International Monetary Fund, 2000. "Growth Experience in Transition Countries, 1990-1998," IMF Occasional Papers 184, International Monetary Fund.
  11. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195211269, October.
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  13. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
  14. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
  15. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  16. Jose De Gregorio & Thomas Krueger & Alberto Giovannini, 1993. "The Behavior of Nontradable Goods Prices in Europe," IMF Working Papers 93/45, International Monetary Fund.
  17. Joshua Aizenman & Peter Isard, 1996. "The sustainability of economic transformation," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 1(4), pages 413-440.
  18. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(374), pages 279-86, June.
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  20. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Dubravko Mihaljek & Marc Klau, 2003. "The Balassa-Samuelson effect in central Europe: a disaggregated analysis," BIS Working Papers 143, Bank for International Settlements.
  2. Lojschová, Adriana, 2003. "Estimating the Impact of the Balassa-Samuelson Effect in Transition Economies," Economics Series, Institute for Advanced Studies 140, Institute for Advanced Studies.
  3. Jaanus Raim, 2004. "The Alternative to the Existing System of the Concepts about Purchasing Power Parity Deviations . Derived from the Estonian Experience," Working Papers, Tallinn School of Economics and Business Administration, Tallinn University of Technology 115, Tallinn School of Economics and Business Administration, Tallinn University of Technology.

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