IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2004-675.html
   My bibliography  Save this paper

Productivity Growth and the Real Appreciation of the Accession Countries' Currencies

Author

Listed:
  • Kirsten Lommatzsch

    ()

  • Silke Tober

    ()

Abstract

In the process of catch-up growth the Czech Republic, Hungary and Poland have experienced a transition to the production of higher-quality goods. We incorporate this effect in a theoretical model of exchange rates and econometrically estimate its impact on equilibrium real exchange rates. We find support for our hypothesis that productivity increases in industry can be regarded as one source of the observed PPI-based real appreciation of the accession countries??? currencies. The productivity gains experienced during economic catch-up occur as higher-quality goods are produced and imply an increased export capacity as well as import substitution. To some extent real appreciation can therefore be viewed as an equilibrium phenomenon.

Suggested Citation

  • Kirsten Lommatzsch & Silke Tober, 2004. "Productivity Growth and the Real Appreciation of the Accession Countries' Currencies," William Davidson Institute Working Papers Series 2004-675, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2004-675
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40061/3/wp675.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Coricelli, Fabrizio & Jazbec, Bostjan, 2004. "Real exchange rate dynamics in transition economies," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 83-100, March.
    2. 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.
    3. Egert, Balazs & Drine, Imed & Lommatzsch, Kirsten & Rault, Christophe, 2003. "The Balassa-Samuelson effect in Central and Eastern Europe: myth or reality?," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 552-572, September.
    4. Ray Barrell & Dawn Holland, 2000. "Foreign Direct Investment and Enterprise Restructuring in Central Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 477-504, July.
    5. MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank.
    6. MacDonald, Ronald, 1998. "What determines real exchange rates?: The long and the short of it," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(2), pages 117-153, June.
    7. Lommatzsch, Kirsten & Tober, Silke, 2002. "Monetary policy aspects of the enlargement of the Euro area," Research Notes 4, Deutsche Bank Research.
    8. International Monetary Fund, 2001. "Interpreting Real Exchange Rate Movements in Transition Countries," IMF Working Papers 2001/056, International Monetary Fund.
    9. Ronald MacDonald & Peter B. Clark, 1998. "Exchange Rates and Economic Fundamentals; A Methodological Comparison of BEERs and FEERs," IMF Working Papers 1998/067, International Monetary Fund.
    10. Baxter, Marianne, 1994. "Real exchange rates and real interest differentials: Have we missed the business-cycle relationship?," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 5-37, February.
    11. Michael Landesmann & Robert Stehrer, 2002. "The CEECs in the Enlarged Europe: Convergence Patterns, Specialization and Labour Market Implications," wiiw Research Reports 286, The Vienna Institute for International Economic Studies, wiiw.
    12. Stein, Jerome L. & Allen, Polly Reynolds, 1998. "Fundamental Determinants of Exchange Rates," OUP Catalogue, Oxford University Press, number 9780198293064.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Balázs Égert & László Halpern & Ronald MacDonald, 2006. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 257-324, April.
    2. Lommatzsch, Kirsten & Tober, Silke, 2004. "What is behind the real appreciation of the accession countries' currencies?: An investigation of the PPI-based real exchange rate," Economic Systems, Elsevier, vol. 28(4), pages 383-403, December.
    3. Égert, Balázs, 2004. "Assessing equilibrium exchange rates in CEE acceding countries : can we have DEER with BEER without FEER? : A critical survey of the literature," BOFIT Discussion Papers 1/2004, Bank of Finland, Institute for Economies in Transition.
    4. 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.
    5. Marit Hinnosaar & Hannes Kaadu & Lenno Uuskula, 2005. "Estimating the equilibrium exchange rate of the Estonian kroon," Bank of Estonia Working Papers 2005-2, Bank of Estonia, revised 10 Oct 2005.
    6. Lucian Claudiu ANGHEL & Laurentiu-Mihai TREAPAT, 2015. "Main Economic Policies in order to Manage an Optimum Accession of Romania to the Euro Zone," Management Dynamics in the Knowledge Economy Journal, College of Management, National University of Political Studies and Public Administration, vol. 3(1), pages 151-169, March.
    7. Frait, Jan & Komarek, Lubos & Melecky, Martin, 2006. "The Real Exchange Rate Misalignment in the Five Central European Countries," Economic Research Papers 269632, University of Warwick - Department of Economics.
    8. Robert J. Sonora & Josip Tica, 2014. "Harrod, Balassa, and Samuelson (re)visit Eastern Europe," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-17, December.
    9. Kateřina Šmídková & Aleš Bulíř, 2005. "Would Fast Sailing Towards the Euro Be Smooth? What Fundamental Real Exchange Rates Tell Us," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(4), pages 291-316.
    10. Katerina Smidkova & Ales Bulir, 2004. "Would Fast Sailing Towards the Euro Be Smooth?: What Fundamental Real Exchange Rates Tell Us About Acceding Economies," Macroeconomics 0408002, University Library of Munich, Germany.
    11. Joanna Beza-Bojanowska, 2009. "The Behavioural Zloty/Euro Equilibrium Exchange Rate," NBP Working Papers 55, Narodowy Bank Polski, Economic Research Department.
    12. Anna Lipinska, 2006. "Monetary regime choice in the accession countries - a theoretical analysis," Computing in Economics and Finance 2006 243, Society for Computational Economics.
    13. García Solanes José, 2008. "Real Exchange Rate Appreciation in Central and Eastern European Countries. Why the Balassa-Samuelson Effect Does Not Explain the Whole Story," Working Papers 2010100, Fundacion BBVA / BBVA Foundation.
    14. Egert, Balazs & Halpern, Laszlo, 2006. "Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1359-1374, May.
    15. José García Solanes & Fernando Torrejón Flores, "undated". "Testing the BalassA-Samuelson hypothesis in two different groups of countries: OECD and Latin America," Working Papers on International Economics and Finance 05-02, FEDEA.
    16. Lipinska, Anna, 2006. "The Maastricht convergence criteria and optimal monetary policy for the EMU accession countries," MPRA Paper 1795, University Library of Munich, Germany.
    17. Kim, Byung-Yeon & Korhonen, Iikka, 2005. "Equilibrium exchange rates in transition countries: Evidence from dynamic heterogeneous panel models," Economic Systems, Elsevier, vol. 29(2), pages 144-162, June.
    18. Mariam Camarero & Javier Ordóñez & Cecilio Tamarit, 2002. "The Euro-Dollar exchange rate: Is it fundamental?," European Economy Group Working Papers 16, European Economy Group.
    19. Lipinska, Anna, 2008. "The Maastricht Convergence Criteria and Monetary Regimes for the EMU Accession Countries," MPRA Paper 16375, University Library of Munich, Germany.
    20. repec:onb:oenbwp:y::i:106:b:1 is not listed on IDEAS
    21. Mirjana Miletić, 2012. "Estimating the Impact of the Balassa-Samuelson Effect in Central and Eastern European Countries: A Revised Analysis of Panel Data Cointegration Tests," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 475-499, September.

    More about this item

    Keywords

    relative productivity growth; catch-up growth; real exchange rates; transition economies;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • 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
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2004-675. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WDI). General contact details of provider: https://edirc.repec.org/data/wdumius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.