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Interpreting real exchange rate movements in transition countries

  • Broeck, Mark De



  • Sløk, Torsten



Several transition countries have experienced strong real exchange rate appreciations. This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector. Using panel data over the period 1993–98, the results show clear evidence of productivity-driven exchange rate movements in the central and eastern European and Baltic countries. Transition countries, particularly the EU accession countries that have begun to catch up, can expect to experience further productivity-driven real exchange rate appreciations. Evidence from a large cross-section of non-transition countries indicates that catching up by one percent will be associated with a 0.4 percent real appreciation.

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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2001.

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Length: 46 pages
Date of creation: 26 Jul 2001
Date of revision:
Handle: RePEc:hhs:bofitp:2001_007
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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  4. Kornélia Krajnyák & Jeromin Zettelmeyer, 1997. "Competitiveness in Transition Economies: What Scope for Real Appreciation?," IMF Working Papers 97/149, International Monetary Fund.
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  8. Balázs Égert & Kirsten Lommatzsch, 2004. "Equilibrium Exchange Rates in the Transition: The Tradable Price-Based Real Appreciation and Estimation Uncertainty," William Davidson Institute Working Papers Series 2004-676, William Davidson Institute at the University of Michigan.
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  13. Panagiotis Liargovas, 1999. "An Assessment of Real Exchange Rate Movements in the Transition Economies of Central and Eastern Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 11(3), pages 299-318.
  14. Ronald Mac Donald, 1998. "What Do We Really Know About Real Exchange Rates?," Working Papers 28, Oesterreichische Nationalbank (Austrian Central Bank).
  15. Zoltán M. Jakab & Mihály András Kovács, 1999. "Determinants of Real Exchange Rate Fluctuations in Hungary," MNB Working Papers 1999/6, Magyar Nemzeti Bank (Central Bank of Hungary).
  16. International Monetary Fund, 2000. "The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union: A View From the Supply Side," IMF Working Papers 00/32, International Monetary Fund.
  17. Yongcheol Shin & Ron P Smith & Mohammad Hashem Pesaran, 1998. "Pooled Mean Group Estimation of Dynamic Heterogeneous Panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh.
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  20. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers 0051, Econometric Society.
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