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Exchange Rate Fluctuations in the New Member States of the European Union Author info | Abstract | Publisher info | Download info | Related research | Statistics Zenon Kontolemis (International Monetary Fund)
Kevin Ross (International Monetary Fund)
This paper assesses the role of exchange rates in moderating the impact of economic disturbances in the new member states of the European Union, and finds some evidence in favour of this proposition. Exchange rates are mostly driven by real (demand) shocks, whilst output by real supply shocks. Nominal shocks, which have no long-run impact on output, are nevertheless important in explaining exchange rate fluctuations implying that less exchange rate flexibility may indeed be warranted in the run- up to the adoption of the euro. We find that while interest rate shocks generally do not explain exchange rate fluctuations, credit shocks matter in certain cases and seem to have considerable impact on exchange rate developments (e.g., for Poland). The analysis also shows that based on the average responses of exchange rates to different shocks, the adoption of narrow bands inside ERM II may be risky.
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Paper provided by EconWPA in its series Macroeconomics with number
0504015.
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Length: 35 pages
Date of creation: 08 Apr 2005Date of revision:
Handle: RePEc:wpa:wuwpma:0504015Note: Type of Document - pdf; pages: 35Contact details of provider: Web page: http://129.3.20.41
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Keywords: Exchange rate fluctuations ; transmission economies ; ERM II ; EMU ; structural VAR ; Find related papers by JEL classification: E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports :
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Sfia, Mohamed Daly, 2006.
"Tunisia: Sources Of Real Exchange Rate Fluctuations ,"
MPRA Paper
3129, University Library of Munich, Germany.
[Downloadable!]
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