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Real Exchange Rate Dynamics and Output Contraction under Transition

  • Christos Papazoglou


    (Bank of Greece, Economic Research Department and Panteion University)

Two major stylized facts that emerged during the early transition experience of the economies of Central and Eastern Europe were the fall in output and the appreciation of the real exchange rate. In this paper, we attempt to give a theoretical explanation, beyond that found in the existing literature, for the emergence of these two facts, which relies on the role of two basic characteristics of these economies in the early stages of transition. The first refers to their structure involving the existence of an almost liberalized price system for domestic output, a large part of which, however, was still produced by state firms and the second to the nature of the disturbances they initially encountered.

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Paper provided by Bank of Greece in its series Working Papers with number 29.

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Length: 25 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:bog:wpaper:29
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  1. Christos Papazoglou & Eric J. Pentecost, 2003. "The Dynamic Adjustment of a Transition Economy in the Early Stages of Transformation," Working Papers 03, Bank of Greece.
  2. Jan Svejnar, 2002. "Transition Economies: Performance and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 3-28, Winter.
  3. Saul Estrin, 2002. "Competition and Corporate Governance in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 101-124, Winter.
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