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

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  • 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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    Cited by:

    1. Magda Kandil, 2009. "Does Demand Volatility Lower Growth and Raise Inflation? Evidence from the Caribbean," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 45-69, January-J.
    2. repec:eco:journ2:2017-05-18 is not listed on IDEAS
    3. Halmi Mirela, 2012. "The Correlation Between The Exchange Rate And The Direct Foreign Investments," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 809-815, July.
    4. Furceri, Davide & Guichard, Stéphanie & Rusticelli, Elena, 2012. "The effect of episodes of large capital inflows on domestic credit," The North American Journal of Economics and Finance, Elsevier, vol. 23(3), pages 325-344.
    5. Sanginabadi, Bahram & Heidari, Hassan, 2012. "The Effects of Exchange Rate Volatility on Economic Growth in Iran," MPRA Paper 52406, University Library of Munich, Germany.
    6. Yuan, Shen & Peng, Shaobing, 2017. "Trends in the economic return on energy use and energy use efficiency in China's crop production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 836-844.
    7. Mirdala, Rajmund, 2013. "Current Account Adjustments and Real Exchange Rates in the European Transition Economies," MPRA Paper 48901, University Library of Munich, Germany.
    8. Mirdala, Rajmund, 2013. "Real Output and Prices Adjustments under Different Exchange Rate Regimes," MPRA Paper 46879, University Library of Munich, Germany.
    9. Mourad Zmami & Ousama Ben-Salha, 2015. "Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?," Economic Change and Restructuring, Springer, vol. 48(2), pages 137-167, May.
    10. Ghiba, Nicolae, 2010. "Efecte ale volatilității cursului de schimb asupra exporturilor
      [Effects of exchange rate volatility on exports]
      ," MPRA Paper 28448, University Library of Munich, Germany.
    11. Mirdala, Rajmund, 2012. "Macroeconomic Aspects of Real Exchange Rate Volatility in the Central European Countries," MPRA Paper 40910, University Library of Munich, Germany.
    12. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Boršič, Darja, 2013. "Real interest parity in Central and Eastern European countries: Evidence on integration into EU and the US markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 163-180.

    More about this item

    Keywords

    EU; Exchange Rate Volatility; Growth; FDI; Credit; Current Account;

    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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