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Fundamental equilibrium exchange rate for the Polish zloty

In May 2004 Poland joined the European Union and is thereby committed to introduce the euro in the forthcoming years. The balance of costs and benefits of the euro adoption depends on the decision of the Polish and European authorities concerning the level of central parity in the ERM II, and subsequently the conversion rate of the zloty. In order to address the issue of an "ideal" level of the real exchange rate this paper proposes a model which is applied to estimate the level of the equilibrium of the zloty. The results indicate that at the end of 2004 the zloty was undervalued by 4.3%.

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Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 35.

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Length: 27
Date of creation: 2005
Date of revision:
Handle: RePEc:nbp:nbpmis:35
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  1. Ronald MacDonald & Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals: A Methodological Comparison of BEERs and FEERs," IMF Working Papers 98/67, International Monetary Fund.
  2. Maurice Obstfeld & Kenneth Rogoff, 1994. "The Intertemporal Approach to the Current Account," NBER Working Papers 4893, National Bureau of Economic Research, Inc.
  3. Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 200-224.
  4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  5. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  6. MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank, Research Centre.
  7. Jeffrey A. Frankel & Kenneth A. Froot, 1986. "The Dollar as an Irrational Speculative Bubble: A Tale of Fundamentalisists," NBER Working Papers 1854, National Bureau of Economic Research, Inc.
  8. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment: Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
  9. Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2004. "Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series 0311, European Central Bank.
  10. Jerome L. Stein, 1995. "The Fundamental Determinants of the Real Exchange Rate of the U. S. Dollar Relative to Other G-7 Currencies," IMF Working Papers 95/81, International Monetary Fund.
  11. Gian Maria Milesi-Ferrett & Assaf Razin, 1996. "Sustainability of Persistent Current Account Deficits," NBER Working Papers 5467, National Bureau of Economic Research, Inc.
  12. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
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