IDEAS home Printed from https://ideas.repec.org/p/cnb/wpaper/2011-01.html
   My bibliography  Save this paper

Sustainable Real Exchange Rates in the New EU Member States: What Did the Great Recession Change?

Author

Listed:
  • Jan Babecky
  • Ales Bulir
  • Katerina Smidkova

Abstract

The Great Recession affected export and import patterns in our sample of new EU member countries, and these changes, coupled with a more volatile external environment, have a profound impact on our estimates of real exchange rate misalignments and projections of sustainable real exchange rates. We find that real misalignments in several countries with pegged exchange rates and excessive external liabilities widened relative to earlier estimates. While countries with balanced net trade positions may experience sustainable appreciation during 2010-2014, several currencies are likely to require real depreciation to maintain sustainable net external debt.

Suggested Citation

  • Jan Babecky & Ales Bulir & Katerina Smidkova, 2011. "Sustainable Real Exchange Rates in the New EU Member States: What Did the Great Recession Change?," Working Papers 2011/01, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2011/01
    as

    Download full text from publisher

    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2011_01.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca A Ricci & Gian M Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
    2. Bulir, Ales & Smidkova, Katerina, 2005. "Exchange rates in the new EU accession countries: What have we learned from the forerunners?," Economic Systems, Elsevier, vol. 29(2), pages 163-186, June.
    3. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External wealth, the trade balance, and the real exchange rate," European Economic Review, Elsevier, vol. 46(6), pages 1049-1071, June.
    4. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    5. Andrei A. Levchenko & Logan Lewis & Linda L. Tesar, 2009. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," Working Papers 592, Research Seminar in International Economics, University of Michigan.
    6. Fabrizio Coricelli & Mathilde Maurel, 2011. "Growth and Crisis in Transition: A Comparative Perspective," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 49-64, February.
    7. Davide Furceri & Aleksandra Zdzienicka, 2011. "The real effect of financial crises in the European transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(1), pages 1-25, January.
    8. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
    9. Dr Martin Weale & Andrew P Blake & Gonzalo Camba-Mendez, 1998. "UK Consumption in the long run: the determinants of consumer spending 1925-1995," National Institute of Economic and Social Research (NIESR) Discussion Papers 138, National Institute of Economic and Social Research.
    10. Virginie Coudert & Cécile Couharde, 2009. "Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 121-136, February.
    11. William Ellery Channing, 1994. "Change," American Journal of Economics and Sociology, Wiley Blackwell, vol. 53(1), pages 15-15, January.
    12. Barrell, Ray & Dawn Holland & Nigel Pain, 2002. "An Econometric Macro-model of Transition: Policy Choices in the Pre-Accession Period," Royal Economic Society Annual Conference 2002 15, Royal Economic Society.
    13. International Monetary Fund, 2010. "The Credit Boom in the EU New Member States; Bad Luck or Bad Policies?," IMF Working Papers 10/130, International Monetary Fund.
    14. International Monetary Fund, 2005. "Adopting the Euro in Central Europe; Challenges of the Next Step in European Integration," IMF Occasional Papers 234, International Monetary Fund.
    15. repec:nsr:niesrd:275 is not listed on IDEAS
    16. Peter Backé & Martin Feldkircher & Ernest Gnan & Mathias Lahnsteiner & Ewald Nowotny & Jürgen Kröger & Stefan Kuhnert & Mary McCarthy & Sebastián Nieto-Parra & Javier Santiso & Stéphane Dees & Filippo, 2010. "Contagion and Spillovers: New Insights from the Crisis," SUERF Studies, SUERF - The European Money and Finance Forum, number 2010/5 edited by Peter Backé, Ernest Gnan and Philipp Hartmann, April.
    17. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External wealth, the trade balance, and the real exchange rate," European Economic Review, Elsevier, vol. 46(6), pages 1049-1071, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Viktors Ajevskis & Ramune Rimgailaite & Uldis Rutkaste & Olegs Tkacevs, 2012. "The Assesment of Equilibrium Real Echange Rate of Latvia," Working Papers 2012/04, Latvijas Banka.
    2. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, March.
    3. Iršová, Zuzana & Havránek, Tomáš, 2013. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," World Development, Elsevier, vol. 42(C), pages 1-15.
    4. Oxana Babecka Kucharcukova & Alexis Derviz & Vaclav Hausenblas & Michal Hlavacek & Mark Joy & Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Ivana Kubicova & Jitka Lesanovska, 2014. "Macroprudential Research: Selected Issues," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 12, number rb12/2 edited by Jan Babecky & Borek Vasicek, March.
    5. Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bulir, Ales & Smidkova, Katerina, 2005. "Exchange rates in the new EU accession countries: What have we learned from the forerunners?," Economic Systems, Elsevier, vol. 29(2), pages 163-186, June.
    2. Kateřina Šmídková & Aleš Bulíř, 2005. "Would Fast Sailing Towards the Euro Be Smooth? What Fundamental Real Exchange Rates Tell Us," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(4), pages 291-316.
    3. Kateřina Šmídková & Ray Barrell & Dawn Holland, 2003. "Estimates of fundamental real exchange rates for the five eu pre-accession countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2003(4), pages 291-315.
    4. Mariarosaria Comunale, 2015. "Current Account and Reer Misalignments in Central Eastern EU Countries: an Update Using the Macroeconomic Balance Approach," Bank of Lithuania Working Paper Series 20, Bank of Lithuania.
    5. Katerina Smidkova & Ales Bulir, 2004. "Would Fast Sailing Towards the Euro Be Smooth?: What Fundamental Real Exchange Rates Tell Us About Acceding Economies," Macroeconomics 0408002, University Library of Munich, Germany.
    6. Comunale, Mariarosaria, 2018. "Current account and real effective exchange rate misalignments in Central Eastern EU countries: An update using the macroeconomic balance approach," Economic Systems, Elsevier, vol. 42(3), pages 414-436.
    7. Jan Babecký & Aleš Bulíř & Kateřina šmídková, 2009. "Sustainable real exchange rates in the new EU Member States: Is FDI a mixed blessing?," European Economy - Economic Papers 2008 - 2015 368, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Robert A. Blecker, 2009. "Long-Run Growth in Open Economies: Export-Led Cumulative Causation or a Balance-of-Payments Constraint?," Working Papers 2009-23, American University, Department of Economics.
    9. Galstyan, Vahagn & Lane, Philip R., 2009. "Fiscal Policy and International Competitiveness: Evidence from Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(3), pages 299-315.
    10. Jean-Louis COMBES & Patrick PLANE & Tidiane KINDA & Rasmané OUEDRAOGO, 2017. "Does It Pour When it Rains? Capital Flows and Economic Growth in Developing Countries," Working Papers P157, FERDI.
    11. International Monetary Fund, 2012. "Switzerland; 2012 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; Statement by the Executive Director for Switzerland," IMF Staff Country Reports 12/106, International Monetary Fund.
    12. Mariarosaria Comunale, 2019. "Long‐run determinants and misalignments of the real effective exchange rate in the EU," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(5), pages 649-672, November.
    13. Mariam Camarero & Josep Lluís Carrion-i-Silvestre & Cecilio Tamarit, 2010. "External imbalances in a monetary union. Does the Lawson doctrine apply to Europe?," Working Papers 10-09, Asociación Española de Economía y Finanzas Internacionales.
    14. repec:onb:oenbfi:y:2012:i:2:b:3 is not listed on IDEAS
    15. 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.
    16. Vahagn Galstyan & Adnan Velic, 2017. "Taxation, Debt and Relative Prices in the Long Run: The Irish Experience," The Economic and Social Review, Economic and Social Studies, vol. 48(3), pages 231-251.
    17. International Monetary Fund, 2003. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country; The Case of Russia," IMF Working Papers 03/93, International Monetary Fund.
    18. Fidora, Michael & Giordano, Claire & Schmitz, Martin, 2017. "Real exchange rate misalignments in the euro area," Working Paper Series 2108, European Central Bank.
    19. Lone Christiansen & Alessandro Prati & Luca Antonio Ricci & Thierry Tressel, 2010. "External Balance in Low-Income Countries," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 265-322, National Bureau of Economic Research, Inc.
    20. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2011. "Market Freedom and the Global Recession," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 111-135, April.
    21. Ghironi, Fabio & Hernandez, Kolver, 2004. "Comments on "Monetary policy rules and exchange rate flexibility in a simple dynamic general equilibrium model"," Journal of Macroeconomics, Elsevier, vol. 26(2), pages 309-313, June.

    More about this item

    Keywords

    Foreign direct investment; Great Recession; new EU member states; sustainable exchange rates.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cnb:wpaper:2011/01. 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: (Jan Babecky). General contact details of provider: http://edirc.repec.org/data/cnbgvcz.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.