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Determinants of the exchange market pressure in the euro-candidate countries

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  • Stavarek, Daniel

Abstract

In the paper we choose the correct model specification for eight new EU Member States (NMS) to estimate the exchange market pressure (EMP) over the period 1995-2009. The results suggest that growth of domestic credit and money multiplier had a significantly positive impact on EMP. Furthermore, EMP in many NMS was determined by foreign disturbances, namely euro area’s money supply, foreign capital inflow and interest rate differential. EMP in most of NMS with flexible exchange rate regime was primarily absorbed by changes in international reserves. This forms, along with fundamentally stable EMP development in recent years, a solid basis for potential fulfilment of the exchange rate stability convergence criterion.

Suggested Citation

  • Stavarek, Daniel, 2010. "Determinants of the exchange market pressure in the euro-candidate countries," MPRA Paper 26933, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26933
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    exchange market pressure; Girton-Roper model; determinants; new EU Member States;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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