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The Effect of Nominal Exchange Rate Volatility on Real Macroeconomic Performance in the CEE Countries

Author

Listed:
  • Olga Arratibel

    (European Central Bank, Directorate General Economics, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany)

  • Davide Furceri

    (University of Palermo, Department of Economics, Italy ; OECD, Macroeconomic Analysis Division, 2 rue André-Pascal, 75775 Paris Cedex 16, France)

  • Reiner Martin

    (European Central Bank, Directorate General Economics, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany)

  • Aleksandra Zdzienicka

    (CNRS, UMR 5824, GATE, Ecully, F-69130, France; Corresponding adress: ENS-LSH, GATE, 15 parvis René Descartes, BP 7000 69342 Lyon Cedex, France)

Abstract

This paper analyzes the relation between nominal exchange rate volatility and several macroeconomic variables, namely real per output growth, excess credit, foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member States. Using panel estimations for the period between 1995 and 2008, we find that lower exchange rate volatility is associated with higher growth, higher stocks of FDI, higher current account deficits, and higher excess credit. The results are economically and statistically significant, and robust.

Suggested Citation

  • Olga Arratibel & Davide Furceri & Reiner Martin & Aleksandra Zdzienicka, 2009. "The Effect of Nominal Exchange Rate Volatility on Real Macroeconomic Performance in the CEE Countries," Working Papers 0934, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:0934
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    More about this item

    Keywords

    EU; Exchange Rate Volatility; Growth; FDI; Credit; Current Account;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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