IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Effective Exchange Rates in Central and Eastern European Countries: Cyclicality and Relationship with Macroeconomic Fundamentals

Listed author(s):
  • Stavárek Daniel

    (Department of Finance and Accounting, School of Business Administration, Silesian University, Univerzitní nám. 1934/3, 733 40 Karviná, Czechia)

  • Miglietti Cynthia

    ()

    (Department of Finance and Accounting, School of Business Administration, Silesian University, Univerzitní nám. 1934/3, 733 40 Karviná, Czechia)

This paper examines the evolution of effective exchange rates in nine Central and Eastern European countries in terms of development trends, volatility and cyclicality. Consequently, it provides direct empirical evidence on the nature of the relationship between effective exchange rates and selected macroeconomic fundamentals, addressing a key precondition of numerous exchange rate determination models and theories that attempt to explain the role of exchange rates in the economy. The results suggest that flexible exchange rate arrangements are reflected in both nominal and real effective exchange rates having higher volatility and variability. Furthermore, the results provide mixed evidence in terms of intensity, direction and cyclicality, but show a weak correlation between exchange rates and fundamentals. Sufficiently high coefficients are found only for money supply. Consequently, using fundamentals for the determination of exchange rates and using the exchange rate to explain economic development may be of limited use for the countries analyzed.

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: https://www.degruyter.com/view/j/revecp.2015.15.issue-2/revecp-2015-0015/revecp-2015-0015.xml?format=INT
Download Restriction: no

Article provided by De Gruyter Open in its journal Review of Economic Perspectives.

Volume (Year): 15 (2015)
Issue (Month): 2 (June)
Pages: 157-177

as
in new window

Handle: RePEc:vrs:reoecp:v:15:y:2015:i:2:p:157-177:n:3
Contact details of provider: Web page: http://www.degruyteropen.com

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. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters,in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
  2. Dal Bianco, Marcos & Camacho, Maximo & Perez Quiros, Gabriel, 2012. "Short-run forecasting of the euro-dollar exchange rate with economic fundamentals," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 377-396.
  3. Dedola, Luca & Leduc, Sylvain, 2001. "Why Is the Business-Cycle Behaviour of Fundamentals Alike across Exchange-Rate Regimes?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 401-419, October.
  4. Stavarek, Daniel, 2013. "Cyclical relationship between exchange rates and macro-fundamentals in Central and Eastern Europe," MPRA Paper 45327, University Library of Munich, Germany.
  5. Cheung, Yin-Wong & Chinn, Menzie D. & Pascual, Antonio Garcia, 2005. "Empirical exchange rate models of the nineties: Are any fit to survive?," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1150-1175, November.
  6. Lian An & Jian Wang, 2012. "Exchange Rate Pass-Through: Evidence Based on Vector Autoregression with Sign Restrictions," Open Economies Review, Springer, vol. 23(2), pages 359-380, April.
  7. Margarida Duarte & Diego Restuccia & Andrea L. Waddle, 2007. "Exchange rates and business cycles across countries," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 57-76.
  8. 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.
  9. Mirdala, Rajmund, 2013. "Exchange Rate Pass-Through to Domestic Prices under Different Exchange Rate Regimes," MPRA Paper 53209, University Library of Munich, Germany.
  10. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
  11. Mathias Hoffmann & Oliver Holtemˆller, 2010. "Transmission of Nominal Exchange Rate Changes to Export Prices and Trade Flows and Implications for Exchange Rate Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 127-161, 03.
  12. Irina Bunda & Filippo Di Mauro & Rasmus Rüffer, 2008. "The Changing Role of the Exchange Rate in a Globalised Economy," Post-Print halshs-00328652, HAL.
  13. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  14. De Grauwe, Paul & Grimaldi, Marianna, 2006. "Exchange rate puzzles: A tale of switching attractors," European Economic Review, Elsevier, vol. 50(1), pages 1-33, January.
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:vrs:reoecp:v:15:y:2015:i:2:p:157-177:n:3. 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: (Peter Golla)

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.