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Adjustment to the Asymmetric Shocks and Currency Unions: the Case of Belarus and Russia

  • Chernookiy Valery

    ()

The paper analyzes mechanism of adjustment to the asymmetric shocks in terms of trade in possible currency union of Belarus and Russia. It is emphasized the role of real exchange rate in this process. An empirical analysis based on panel data confirms the asymmetric effect of fuel price changes on the equilibrium real exchange rate in two countries. At the same time, according to our estimates, real exchange rate changes affect significantly real output and its structure in Belarus. On the base of analysis provided, conclusion is made about necessity to create a fiscal stabilization mechanism which would allow to smooth negative effect of asymmetric shocks on Belarusian economy under currency union.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 05-07e.

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Date of creation: 04 May 2005
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Handle: RePEc:eer:wpalle:05-07e
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