IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members

  • Nikolaos Giannellis

    ()

  • Athanasios Papadopoulos

In this study, we attempt to examine the possibility of emergence of significant fluctuations of the exchange rates in the future for the candidate EMU countries. In doing so, we estimate the equilibrium rate of the nominal effective exchange rate for Poland, Hungary, Slovak Republic and Malta through the BEER and PEER approaches. While the PEER-based estimation implies a large misalignment rate for the Hungarian forint, the BEER-based analysis shows that the present exchange rates of the countries considered do not deviate significantly from their equilibrium rates. As a consequence, based on BEER analysis, we do not expect large fluctuations in the effective exchange rates among the currencies considered. Hence, the relevant effective exchange rates are expected to be relatively stable. As a matter of fact, the entry of those countries into EMU is not expected to weaken the stability of Euro. Copyright Springer Science+Business Media, LLC 2007

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1007/s11079-007-9040-x
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 3 (July)
Pages: 307-326

as
in new window

Handle: RePEc:kap:openec:v:18:y:2007:i:3:p:307-326
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323

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.:

as in new window
  1. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  2. Mise, Emi & Kim, Tae-Hwan & Newbold, Paul, 2005. "On suboptimality of the Hodrick-Prescott filter at time series endpoints," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 53-67, March.
  3. Francisco Maeso-Fernandez & Chiara Osbat & Bernd Schnatz, 2001. "Determinants of the euro real effective exchange rate: a BEER/PEER approach," International Finance 0111003, EconWPA.
  4. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
  5. Lucio Sarno & Giorgio Valente & Mark E. Wohar, 2004. "Monetary Fundamentals and Exchange Rate Dynamics under Different Nominal Regimes," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 179-193, April.
  6. Regina Kaiser & Agustín Maravall, 1999. "Estimation of the Business Cycle: a Modified Hodrick-Prescott Filter," Working Papers 9912, Banco de España;Working Papers Homepage.
  7. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
  8. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  9. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  10. Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December.
  11. Minoas Koukouritakis & Leo Michelis, 2005. "Term Structure Linkages Among the New EU Countries and the EMU," Working Papers 0515, University of Crete, Department of Economics.
  12. repec:imf:imfwpa:05/27 is not listed on IDEAS
  13. Frait , Jan & Komárek, Luboš, 2001. "REAL Exchange rate trends in transitional countries," The Warwick Economics Research Paper Series (TWERPS) 596, University of Warwick, Department of Economics.
  14. Chowdhury, Ibrahim & Sarno, Lucio & Taylor, Mark P, 2002. "Non-Linear Dynamics in Deviations from the Law of One Price: A Broad-Based Empirical Study," CEPR Discussion Papers 3377, C.E.P.R. Discussion Papers.
  15. Robert E. Cumby & John Huizinga, 1990. "The Predictability of Real Exchange Rate Changes in the Short and Long Run," NBER Working Papers 3468, National Bureau of Economic Research, Inc.
  16. Venus Khim-Sen Liew, 2003. "The Validity of PPP Revisited: An Application of Non-linear Unit Root Test," International Finance 0308001, EconWPA.
  17. Balazs Egert & Amina Lahrèche-Revil, 2003. "Estimating the Fundamental Equilibrium Exchange Rate of Central and Eastern European Countries; The EMU Enlargement Perspective," Working Papers 2003-05, CEPII research center.
  18. Angelos Kanas, 2005. "Modelling The Us/Uk Real Exchange Rate-Real Interest Rate Differential Relation: A Multivariate Regime Switching Approach," Manchester School, University of Manchester, vol. 73(2), pages 123-140, 03.
  19. Michael, Panos & Nobay, A Robert & Peel, David A, 1997. "Transactions Costs and Nonlinear Adjustment in Real Exchange Rates: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 862-79, August.
  20. Ronald MacDonald, 2001. "Modelling the long-run real effective exchange rate of the New Zealand Dollar," Reserve Bank of New Zealand Discussion Paper Series DP2002/02, Reserve Bank of New Zealand.
  21. Ales Bulir & Katerina Smidkova, 2004. "Exchange Rates in the New EU Accession Countries: What Have We Learned from the Forerunners," Working Papers 2004/10, Czech National Bank, Research Department.
  22. Mahdavi, Saeid & Zhou, Su, 1994. "Purchasing power parity in high-inflation countries: further evidence," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 403-422.
  23. Maurice Obstfeld & Alan M. Taylor, 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," NBER Working Papers 6053, National Bureau of Economic Research, Inc.
  24. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
  25. Peel, David & Sarno, Lucio & Taylor, Mark P, 2001. "Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles," CEPR Discussion Papers 2658, C.E.P.R. Discussion Papers.
  26. repec:imf:imfwpa:00/144 is not listed on IDEAS
  27. Hoffmann, M. & MacDonald, R., 2001. "A real differential view of equilibrium real exchange rate," Discussion Paper Series In Economics And Econometrics 0103, Economics Division, School of Social Sciences, University of Southampton.
  28. Virginie Coudert & Cécile Couharde, 2003. "Exchange Rate Regimes and Sustainable Parities for ceecs in the Run-up to emu Membership," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 983-1012.
  29. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, May.
  30. Martin Melecký & Luboš Komárek, 2007. "The Behavioral Equilibrium Exchange Rate of the Czech Koruna," Transition Studies Review, Springer, vol. 14(1), pages 105-121, May.
  31. Balázs Égert, 2002. "Equilibrium Real Exchange Rates in Central Europe's Transition Economies: Knocking on Heaven's Door," William Davidson Institute Working Papers Series 480, William Davidson Institute at the University of Michigan.
  32. repec:imf:imfwpa:98/67 is not listed on IDEAS
  33. Hoffmann, Mathias & MacDonald, Ronald, 2000. "A real differential view of equilibrium real exchange rates and misalignments," CFS Working Paper Series 2000/08, Center for Financial Studies (CFS).
  34. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  35. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  36. Michael Arghyrou & Virginie Boinet & Christopher Martin, 2005. "Beyond Purchasing Power Parity: Nominal exchange rates, output shocks and non linear/asymmetric equilibrium adjustment in Central Europe," Money Macro and Finance (MMF) Research Group Conference 2005 35, Money Macro and Finance Research Group.
  37. Sarno, Lucio, 2000. "Real exchange rate behavior in the Middle East: a re-examination," Economics Letters, Elsevier, vol. 66(2), pages 127-136, February.
  38. Balázs ÉGERT & Kirsten LOMMATZSCH, . "Equilibrium Real Exchange Rates in Acceding Countries: How Large is Our Confidence (Interval)?," EcoMod2004 330600047, EcoMod.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:18:y:2007:i:3:p:307-326. 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: (Sonal Shukla)

or (Rebekah McClure)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.