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Equilibrium exchange rates in transition countries: Evidence from dynamic heterogenous panel models

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  • Kim, Byung-Yeon
  • Korhonen, Iikka

Abstract

We use a dynamic heterogeneous panel model to estimate real equilibrium exchange rates for advanced transition countries.Our method is based on out-of-sample estimations from middle-income and high-income countries, and we use a pooled mean group estimator.We find that exchange rates have converged in recent years in five transition countries (Czech Republic, Hungary, Poland, Slovakia, and Slovenia) with real equilibrium exchange rates expressed in the US dollars.However, we also find that the currencies of the transition countries studied are substantially overvalued if real effective exchange rates are used.

Suggested Citation

  • Kim, Byung-Yeon & Korhonen, Iikka, 2002. "Equilibrium exchange rates in transition countries: Evidence from dynamic heterogenous panel models," BOFIT Discussion Papers 15/2002, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2002_015
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    More about this item

    Keywords

    exchange rates; transition economies; dynamic heterogeneous panel estimations;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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