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Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

  • Michael Frenkel

    ()

    (Otto Beisheim School of Management)

  • Isabell Koske

    ()

    (Otto Beisheim School of Management)

This paper derives equilibrium real exchange rates for the EU member countries that joined in 2004 and in 2007. Our analysis is based on the natural real exchange rate approach and uses data for the period 1980-2007. We employ a two-step estimation strategy to deal with the limited availability and reliability of data from these countries. We first estimate the model for a panel of 17 OECD countries and then apply the estimated relationship to the new EU member countries. While the model does not support the appreciation of some of the examined currencies in 2005–2007, the development of several other currencies of the CEECs appears to be fairly in line with our NATREX estimates.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 232 (2012)
Issue (Month): 2 (March)
Pages: 129-145

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Handle: RePEc:jns:jbstat:v:232:y:2012:i:2:p:129-145
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