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Real Exchange Rates in Transition Economies

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  • Bo??tjan Jazbec

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Abstract

Paper attempts to develop a model suitable for an analysis of the real exchange rate determination in transition economies. The main distinction from other approaches to the real exchange rate determination is an introduction of the pre-transition period which enables one to separately examine the role of adverse initial conditions and labor market reallocation between the tradable and non-tradable good sectors believed to characterize the extent of structural reforms in transition economies. Empirical findings seem to confirm that transition - when looking only at the real exchange rate behavior - is over once the progress in structural reforms does not affect the real exchange rate determination relative to other factors. Along the lines of research on growth prospects in transition economies, the effect of structural changes on the real exchange rate in more advanced transition economies has on average diminished in the fifth year of the transition process. The results for less advanced economies are in line with other studies on transition.

Suggested Citation

  • Bo??tjan Jazbec, 2002. "Real Exchange Rates in Transition Economies," William Davidson Institute Working Papers Series 482, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2002-482
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39867/3/wp482.pdf
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    References listed on IDEAS

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    Cited by:

    1. Lojschová, Adriana, 2003. "Estimating the Impact of the Balassa-Samuelson Effect in Transition Economies," Economics Series 140, Institute for Advanced Studies.
    2. Dubravko Mihaljek & Marc Klau, 2003. "The Balassa-Samuelson effect in central Europe: a disaggregated analysis," BIS Working Papers 143, Bank for International Settlements.
    3. Jaanus Raim, 2004. "The Alternative to the Existing System of the Concepts about Purchasing Power Parity Deviations . Derived from the Estonian Experience," Working Papers 115, Tallinn School of Economics and Business Administration, Tallinn University of Technology.

    More about this item

    Keywords

    transition economies; real exchange rate; fixed-effects model;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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