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Revisiting the asymmetric impacts of the exchange market pressure on the inflation, interest rate and foreign trade balance in Eastern Europe

Author

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  • Oguzhan Ozcelebi

    (Istanbul University)

  • Kaya Tokmakcioglu

    (Istanbul Technical University)

  • Emre Su

    (Istanbul Technical University)

Abstract

This study examines the relationship between the exchange market pressure (EMP) and macroeconomic and financial variables for Eastern European countries. The increase/decrease in the EMP influences the probability of a currency crisis, while this phenomenon may negatively/positively affect the foreign trade balance and may obstruct/facilitate foreign debt service in the Czech Republic and Poland due to the need for imported inputs for domestic production. We also consider that the effects of EMP can be asymmetrical and be opposed to regimes changes; furthermore, we find for the Czech Republic, Hungary, and Poland that changes in the EMP may affect the probability of a broad financial crisis.

Suggested Citation

  • Oguzhan Ozcelebi & Kaya Tokmakcioglu & Emre Su, 2021. "Revisiting the asymmetric impacts of the exchange market pressure on the inflation, interest rate and foreign trade balance in Eastern Europe," Empirical Economics, Springer, vol. 61(5), pages 2517-2538, November.
    • Handle: RePEc:spr:empeco:v:61:y:2021:i:5:d:10.1007_s00181-020-01965-6
    DOI: 10.1007/s00181-020-01965-6
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    More about this item

    Keywords

    EMP; Asymmetry; Qual VAR; Nonlinear VAR;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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