Exchange Rate Regimes and Equilibrium Exchange Rates in East Asia
The real exchange rates of ceecs have been appreciating for the last decade, especially when measured by consumer prices. We argue that the size of this appreciation is linked to the exchange rate regime, the pegged currencies being more prone to this phenomenon in the long run. We also show that this appreciation is not necessarily linked to overvaluation. First, it is largely reduced when using a proxy of tradable prices as deflator, according to the ¿Balassa-Samuelson effect¿. Second, we use a large sample of emerging countries to calculate ¿normal¿ levels of real exchange rates taking into account the ¿Balassa effect¿ and show that ceecs do not suffer from systematic overvaluation according to this norm. We then calculate Fundamental Equilibrium Exchange Rates, using a model of the foreign trade of five ceecs (Czech Republic, Hungary, Poland, Slovenia and Estonia) and their main partners based on nigem. We show that these ceec currencies only have very small misalignment. This is due to the fact that the response of their foreign trade to small changes in the exchange rate is especially high, because of the high degree of openness and large export price elasticities.
References listed on IDEAS
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.:
- Stein, Jerome L. & Allen, Polly Reynolds, 1998. "Fundamental Determinants of Exchange Rates," OUP Catalogue, Oxford University Press, number 9780198293064, March.
- Menzie David Chinn & Eswar Prasad, 2000.
"Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration,"
IMF Working Papers
00/46, International Monetary Fund.
- Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
- Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc.
- John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, December.
- Simon Wren-Lewis & Rebecca Driver, 1998.
"Real Exchange Rates for the Year 2000,"
Peterson Institute Press: Policy Analyses in International Economics,
Peterson Institute for International Economics, number pa54, 03.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:cai:recosp:reco_545_0001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.