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Competitiveness in Bulgaria; An Assessment of the Real Effective Exchange Rate


  • Piritta Sorsa
  • Dimitar Chobanov


This paper presents an empirical analysis of the medium- and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate that the RER is driven by fundamentals, including labor productivity, terms of trade, world real interest rates, gross savings, and foreign direct investment. The model also shows that there is no significant misalignment of the Bulgarian lev.

Suggested Citation

  • Piritta Sorsa & Dimitar Chobanov, 2004. "Competitiveness in Bulgaria; An Assessment of the Real Effective Exchange Rate," IMF Working Papers 04/37, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/37

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    References listed on IDEAS

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    2. De Broeck, Mark & Slok, Torsten, 2006. "Interpreting real exchange rate movements in transition countries," Journal of International Economics, Elsevier, vol. 68(2), pages 368-383, March.
    3. De Broeck, Mark & Sloek, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition.
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    6. Paul Hallwood & Ronald MacDonald, 2008. "International Money and Finance," Working papers 2008-02, University of Connecticut, Department of Economics.
    7. Kateřina Šmídková & Ray Barrell & Dawn Holland, 2003. "Estimates of fundamental real exchange rates for the five eu pre-accession countries," Prague Economic Papers, University of Economics, Prague, vol. 2003(4).
    8. Rahn, Jörg, 2003. "Bilateral equilibrium exchange rates of EU accession countries against the euro," BOFIT Discussion Papers 11/2003, Bank of Finland, Institute for Economies in Transition.
    9. Nikolay Nenovsky & Kalina Dimitrova, 2002. "Dual Inflation Under the Currency Board: The Challenges of Bulgarian EU Accession," William Davidson Institute Working Papers Series 487, William Davidson Institute at the University of Michigan.
    10. Tarhan Feyzioglu, 1997. "Estimating the Equilibrium Real Exchange Rate; An Application to Finland," IMF Working Papers 97/109, International Monetary Fund.
    11. Jörg Rahn, 2003. "Bilateral Equilibrium Exchange Rates of the EU Accession Countries against the Euro," Quantitative Macroeconomics Working Papers 20306, Hamburg University, Department of Economics.
    12. Edwards, Sebastian, 1988. "Real and monetary determinants of real exchange rate behavior: Theory and evidence from developing countries," Journal of Development Economics, Elsevier, vol. 29(3), pages 311-341, November.
    13. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
    14. Frait , Jan & Komárek, Luboš, 2001. "REAL Exchange rate trends in transitional countries," The Warwick Economics Research Paper Series (TWERPS) 596, University of Warwick, Department of Economics.
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    Cited by:

    1. Egert, Balazs, 2005. "Equilibrium exchange rates in South Eastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) diseased?," Economic Systems, Elsevier, vol. 29(2), pages 205-241, June.
    2. Jerome L. Stein, 2005. "The Transition Economies: A NATREX Evaluation of Research," CESifo Working Paper Series 1449, CESifo Group Munich.
    3. Boileau Loko & Anita Tuladhar, 2005. "Labor Productivity and Real Exchange Rate; The Balassa-Samuelson Disconnect in the former Yugoslav Republic of Macedonia," IMF Working Papers 05/113, International Monetary Fund.
    4. Frenkel Michael & Koske Isabell, 2012. "Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(2), pages 129-145, April.
    5. repec:onb:oenbfi:y:2004:i:2:b:6 is not listed on IDEAS
    6. Sosunov, K. & Ushakov, N., 2009. "Determination of the Real Exchange Rate of the Ruble and Assessment of Long-Run Policy of Real Exchange Rate Targeting," Journal of the New Economic Association, New Economic Association, issue 3-4, pages 97-121.
    7. Sossounov, Kirill & Ushakov, Nikolay, 2009. "Determination of the real exchange rate of rouble and assessment of long-rum policy of real exchange rate targeting," MPRA Paper 18549, University Library of Munich, Germany.
    8. Balázs Égert, 2004. "Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 138-181.


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