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Real Exchange Rates in Central and Eastern Europe : What Scope for the Underlying Fundamentals?

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Author Info

  • Gilles DUFRENOT

    (ERUDITE Univ. Paris 12 & GREQAM Marseille)

  • Balazs Egert

    (National Bank of Austria & William Davidson Institute)

Abstract

The aim of this paper is to study the the fundamental macroeconomic determinants of both the CPI and the PPI-based real effective exchange rate in 5 selected acceding countries from Central and Eastern Europe, i.E the Czech Republic, Hungary, Poland, Slovakia and Slovenia. The paper is based on the combination of two approaches widely used for transition economies, namely the Behavioral Equilibrium Exchange Rate (BEER) and the Structural VAR. Indeed, a cointegration approach is adopted and the estimated VECM model attempts to connect in a structural way the real effective exchange rate to labor productivity, the relative price of non-tradable goods, public deficit and the current account position. Impulse response functions are subsequently employed to investigate how shock in the underlying fundamentals impacts on the effective real exchange rates.

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File URL: http://128.118.178.162/eps/dev/papers/0309/0309002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0309002.

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Date of creation: 03 Sep 2003
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Handle: RePEc:wpa:wuwpdc:0309002

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  1. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
  2. Ali M. Kutan & Selahattin Dibooglu, 1998. "Sources of real and nominal exchange rate fluctuations in transition economies," Working Papers 1998-022, Federal Reserve Bank of St. Louis.
  3. Coricelli, Fabrizio & Jazbec, Bostjan, 2001. "Real Exchange Rate Dynamics in Transition Economies," CEPR Discussion Papers 2869, C.E.P.R. Discussion Papers.
  4. Balázs Égert & Imed Drine & Kirsten Lommatzsch & Christophe Rault, 2002. "The Balassa-Samuelson effect in Central and Eastern Europe: Myth or reality?," William Davidson Institute Working Papers Series 483, William Davidson Institute at the University of Michigan.
  5. Taylor Mark P. & Sarno Lucio, 2001. "Real Exchange Rate Dynamics in Transition Economies: A Nonlinear Analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(3), pages 1-26, October.
  6. Guy Meredith & Menzie D. Chinn, 1998. "Long-Horizon Uncovered Interest Rate Parity," NBER Working Papers 6797, National Bureau of Economic Research, Inc.
  7. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
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Cited by:
  1. Anna Lipinska, 2006. "Monetary regime choice in the accession countries - a theoretical analysis," Computing in Economics and Finance 2006 243, Society for Computational Economics.
  2. David M. Kemme & Saktinil Roy, 2005. "Real Exchange Rate Misalignment: Prelude to Crisis?," William Davidson Institute Working Papers Series wp797, William Davidson Institute at the University of Michigan.
  3. Lipinska, Anna, 2008. "The Maastricht Convergence Criteria and Monetary Regimes for the EMU Accession Countries," MPRA Paper 16375, University Library of Munich, Germany.
  4. Nienke Oomes, 2005. "Maintaining Competitiveness Under Equilibrium Real Appreciation," IMF Working Papers 05/65, International Monetary Fund.
  5. Richard Frensch & Achim Schmillen, 2011. "The Penn Effect and Transition : The New EU Member States in International Perspective," Working Papers 295, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  6. Oomes, Nienke, 2005. "Maintaining competitiveness under equilibrium real appreciation: The case of Slovakia," Economic Systems, Elsevier, vol. 29(2), pages 187-204, June.

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