Zahranicni dluh, kapitalove toky a realny menovy kurz

The paper aims at enriching current discussions about the equilibrium exchange rate level for the economy with large external debt, subdued real income growth, fragile financial sector and repeated problems with current account deficit. The main idea of the paper is to apply one of the newly emerged conceptions of real exchange rate that can indicate potential overvaluation or undervaluation of the exchange rate. The conception which is called DARER (Debt Adjusted Real Exchange Rate) takes into account the effects of current account deficits and of foreign debt on the equilibrium price level and thus real exchange rate. The importance of this particular conception is given by the fact many of the transitional countries finance their long-term deficits on current account by capital inflows, which sometimes contributes to the exchange rate misalignments. We introduce two version of DARER - one, which include effect of foreign direct investment and one which does not. These versions give us potencional band of real overvaluation of the Czech currency. We then combine the overvaluation caused by rising debt with overvaluation of the current real exchange rate with respect to long run trend proxied by Hodrick-Prescott filter. The measure of overall overvaluation can send warning signals indicating that the current level of the real exchange rate can be no longer sustained and the economy might be exposed to danger of a currency crisis.