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The Behavioral Equilibrium Exchange Rate of the Czech Koruna

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Listed author(s):
  • Martin Melecký

    ()

  • Luboš Komárek

Abstract

The behavioural equilibrium exchange rate (BEER) model of the Czech koruna is derived in this paper and estimated by three methods suitable for non-stationary time series. The potential determinants of the real equilibrium exchange rate considered are the productivity differential, the interest rate differential, the terms of trade, net foreign direct investment, net foreign assets, government consumption and the degree of openness. We find that the Czech koruna was on average undervalued over the period 1994 to 2004 by about 7 percent with respect to the estimated BEER. The significant determinants of the equilibrium exchange rate of the Czech koruna appear to be the productivity differential, the real interest rate differential, the terms of trade and net foreign direct investment.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11300-007-0136-1
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Article provided by Springer & Central Eastern European University Network (CEEUN) in its journal Transition Studies Review.

Volume (Year): 14 (2007)
Issue (Month): 1 (May)
Pages: 105-121

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Handle: RePEc:spr:trstrv:v:14:y:2007:i:1:p:105-121
DOI: 10.1007/s11300-007-0136-1
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/european+integration/journal/11300

Keywords: equilibrium exchange rate modelling; time series analysis; exchange rate misalignment; Czech Republic; exchange rate mechanism II; E58; E61; F31; C52; C53;

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Find related papers by JEL classification:
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
  • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
  • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
  • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
  • F31 - International Economics - - International Finance - - - Foreign Exchange

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  1. Kim, Byung-Yeon & Korhonen, Iikka, 2005. "Equilibrium exchange rates in transition countries: Evidence from dynamic heterogeneous panel models," Economic Systems, Elsevier, vol. 29(2), pages 144-162, June.
  2. Christoph Fischer, 2004. "Real currency appreciation in accession countries: Balassa-Samuelson and investment demand," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(2), pages 179-210, June.
  3. De Broeck, Mark & Slok, Torsten, 2006. "Interpreting real exchange rate movements in transition countries," Journal of International Economics, Elsevier, vol. 68(2), pages 368-383, March.
  4. De Broeck, Mark & Sloek, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition.
  5. Kornélia Krajnyák & Jeromin Zettelmeyer, 1998. "Competitiveness in Transition Economies: What Scope for Real Appreciation?," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 309-362, June.
  6. Michal Rubaszek, 2004. "A Model of Balance of Payments Equilibrium Exchange Rate," Eastern European Economics, M.E. Sharpe, Inc., vol. 42(3), pages 5-22, May.
  7. Halpern, László & Wyplosz, Charles, 1995. "Equilibrium Real Exchange Rates in Transition," CEPR Discussion Papers 1145, C.E.P.R. Discussion Papers.
  8. Lommatzsch, Kirsten & Tober, Silke, 2004. "What is behind the real appreciation of the accession countries' currencies?: An investigation of the PPI-based real exchange rate," Economic Systems, Elsevier, vol. 28(4), pages 383-403, December.
  9. Darvas, Zsolt, 2001. "Exchange rate pass-through and real exchange rate in EU candidate countries," Discussion Paper Series 1: Economic Studies 2001,10, Deutsche Bundesbank, Research Centre.
  10. Marit Hinnosaar & Hannes Kaadu & Lenno Uusküla, 2005. "Estimating the equilibrium exchange rate of the Estonian kroon," Bank of Estonia Working Papers 2005-2, Bank of Estonia, revised 10 Oct 2005.
  11. Rahn, Jörg, 2003. "Bilateral equilibrium exchange rates of EU accession countries against the euro," BOFIT Discussion Papers 11/2003, Bank of Finland, Institute for Economies in Transition.
  12. Jörg Rahn, 2003. "Bilateral Equilibrium Exchange Rates of the EU Accession Countries against the Euro," Quantitative Macroeconomics Working Papers 20306, Hamburg University, Department of Economics.
  13. Rumen Dobrinsky, 2003. "Convergence in Per Capita Income Levels, Productivity Dynamics and Real Exchange Rates in the EU Acceding Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 305-334, September.
  14. 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.
  15. International Monetary Fund, 2003. "Competitiveness in the Baltics in the Run-Up to EU Accession," IMF Staff Country Reports 03/114, International Monetary Fund.
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Cited by:

  1. Nikolaos Giannellis & Athanasios Papadopoulos, 2007. "Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members," Open Economies Review, Springer, vol. 18(3), pages 307-326, July.
  2. Horvath, Roman & Komarek, Lubos, 2006. "Equilibrium Exchange Rates in EU New Members: Applicable for Setting the ERM II Central Parity?," MPRA Paper 1180, University Library of Munich, Germany.
  3. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal Policy and its Sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek, June.
  4. Oliver Hossfeld, 2010. "Equilibrium Real Effective Exchange Rates and Real Exchange Rate Misalignments: Time Series vs. Panel Estimates," FIW Working Paper series 065, FIW.
  5. Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.
  6. Claudio A Paiva, 2006. "External Adjustment and Equilibrium Exchange Rate in Brazil," IMF Working Papers 06/221, International Monetary Fund.
  7. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten Years of Inflation Targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, June.

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