Productivity Growth and the Real Appreciation of the Accession Countries' Currencies
AbstractIn the process of catch-up growth the Czech Republic, Hungary and Poland have experienced a transition to the production of higher-quality goods. We incorporate this effect in a theoretical model of exchange rates and econometrically estimate its impact on equilibrium real exchange rates. We find support for our hypothesis that productivity increases in industry can be regarded as one source of the observed PPI-based real appreciation of the accession countries’ currencies. The productivity gains experienced during economic catch-up occur as higher-quality goods are produced and imply an increased export capacity as well as import substitution. To some extent real appreciation can therefore be viewed as an equilibrium phenomenon.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-675.
Length: 28 pages
Date of creation: 01 Apr 2004
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relative productivity growth; catch-up growth; real exchange rates; transition economies;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
- NEP-DEV-2004-06-02 (Development)
- NEP-EEC-2004-06-02 (European Economics)
- NEP-EFF-2004-06-02 (Efficiency & Productivity)
- NEP-IFN-2004-06-02 (International Finance)
- NEP-TRA-2004-06-02 (Transition Economics)
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