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Real exchange rates in small open OECD and transition economies: Comparing apples with oranges?

  • Egert, Balazs
  • Lommatzsch, Kirsten
  • Lahreche-Revil, Amina

We find that productivity gains in tradables cause an appreciation of the real exchange rate via both tradable and nontradable prices in the CEE-5 and have no affect in the Baltic countries, while they lead to a depreciation of the real exchange rate of tradables in OECD economies that overcompensates the appreciation due to nontradable prices. Rising net foreign liabilities lead to a real appreciation in the Baltic countries instead of the expected depreciation found in OECD and CEE-5 countries. These differences are due to the different impact of the fundamentals on the real exchange rate depending on the time horizon studied.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 30 (2006)
Issue (Month): 12 (December)
Pages: 3393-3406

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Handle: RePEc:eee:jbfina:v:30:y:2006:i:12:p:3393-3406
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