Equilibrium Exchange Rates in the Transition: The Tradable Price-Based Real Appreciation and Estimation Uncertainty
This paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Poland, Slovakia and Slovenia. A theoretical model is developed that provides an explanation for the appreciation of the real exchange rate based on tradable prices in the acceding countries. Our model can be considered as a competing but also completing framework to the traditional Balassa-Samuelson model. With this as a background, alternative cointegration methods are applied to time series (Engle-Granger, DOLS, ARDL and Johansen) and to three small-size panels (pooled and fixed effect OLS, DOLS, PMGE and MGE), which leaves us with around 5,000 estimated regressions. This enables us to examine the uncertainty surrounding estimates of equilibrium real exchange rates and the size of the underlying real misalignments.
|Date of creation:||01 Apr 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109|
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crespo Cuaresma, Jesús & Fidrmuc, Jarko & MacDonald, Ronald, 2003.
"The monetary approach to exchange rates in the CEECs,"
BOFIT Discussion Papers
14/2003, Bank of Finland, Institute for Economies in Transition.
- Jesus Crespo-Cuaresma & Jarko Fidrmuc & Ronald MacDonald, 2005. "The monetary approach to exchange rates in the CEECs," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 395-416, 04.
- Jesús Crespo-Cuaresma & Jarko Fidrmuc & Ronald McDonald, 2004. "The monetary approach to exchange rates in the CEECs," Macroeconomics 0401013, EconWPA.
- Peter Pedroni, 1999.
"Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors,"
Department of Economics Working Papers
2000-02, Department of Economics, Williams College.
- Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
- Detken, Carsten & Dieppe, Alistair & Henry, Jérôme & Marin, Carmen & Smets, Frank, 2002. "Model uncertainty and the equilibrium value of the real effective euro exchange rate," Working Paper Series 0160, European Central Bank.
- Balázs Egert, 2005. "The Balassa-Samuelson Hypothesis in Estonia: Oil Shale, Tradable Goods, Regulated Prices and Other Culprits," The World Economy, Wiley Blackwell, vol. 28(2), pages 259-286, 02.
- Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
- Michel Aglietta & Virginie Coudert & Camille Baulant, 1999.
"Compétitivité et régime de change en Europe centrale,"
Programme National Persée, vol. 50(6), pages 1221-1236.
- Michel Aglietta & Camille Baulant & Virginie Coudert, 1998. "Compétitivité et régime de change en Europe Centrale," Working Papers 1998-10, CEPII research center.
- MacKinnon, James G, 1996.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
- LÃ¡szlÃ³ Halpern & Charles Wyplosz, 1997.
"Equilibrium Exchange Rates in Transition Economies,"
IMF Staff Papers,
Palgrave Macmillan, vol. 44(4), pages 430-461, December.
- Lionel Halpern & Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 96/125, International Monetary Fund.
- Romain Duval, 2002. "What Do We Know About Long-run Equilibrium Real Exchange Rates? PPPs vs Macroeconomic Approaches," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 382-403, December.
- Engel, Charles, 1993.
"Real exchange rates and relative prices : An empirical investigation,"
Journal of Monetary Economics,
Elsevier, vol. 32(1), pages 35-50, August.
- Charles Engel, 1992. "Real Exchange Rates and Relative Prices: An Empirical Investigation," NBER Working Papers 4231, National Bureau of Economic Research, Inc.
- Nauro F. Campos & Abrizio Coricelli, 2002.
"Growth in Transition: What We Know, What We Don't, and What We Should,"
Journal of Economic Literature,
American Economic Association, vol. 40(3), pages 793-836, September.
- Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series 470, William Davidson Institute at the University of Michigan.
- Campos, Nauro F & Coricelli, Fabrizio, 2002. "Growth in Transition: What we Know, What we Don't and What we Should," CEPR Discussion Papers 3246, C.E.P.R. Discussion Papers.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Dariusz Rosati, 1996. "Exchange rate policies during transition from plan to market," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 159-184, 05.
- John F. Henry, 1984. "On Equilibrium," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 6(2), pages 214-229, January.
- Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
- Vladimir Benacek & Ladislav Prokop & Jan A. Visek, 2003. "Determining Factors of the Czech Foreign Trade Balance: Structural Issues in Trade Creation," Working Papers 2003/03, Czech National Bank, Research Department.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Balàzs Ègert, 2003.
"Nominal and real convergence in Estonia: the Balassa-Samuelson (Dis)connection,"
Bank of Estonia Working Papers
2003-4, Bank of Estonia, revised 10 Oct 2003.
- Balázs Égert, 2003. "Nominal and Real Convergence in Estonia: The Balassa-Samuelson (dis)connection," William Davidson Institute Working Papers Series 556, William Davidson Institute at the University of Michigan.
- Dariusz K. Rosati, 1994. "Output decline during transition from plan to market: a reconsideration," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(4), pages 419-441, December.
- James H. Stock & Mark W. Watson, 1991.
"A simple estimator of cointegrating vectors in higher order integrated systems,"
Working Paper Series, Macroeconomic Issues
91-3, Federal Reserve Bank of Chicago.
- Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
- Uwe Dulleck & Neil Foster & Robert stehrer & Julia Wörz, 2003. "Dimensions of quality upgrading - Evidence for CEEC´s," Vienna Economics Papers 0314, University of Vienna, Department of Economics.
- KornÃ©lia KrajnyÃ¡k & Jeromin Zettelmeyer, 1998.
"Competitiveness in Transition Economies: What Scope for Real Appreciation?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 45(2), pages 309-362, June.
- Kornelia Krajnyak & Jeronimo Zettelmeyer, 1997. "Competitiveness in Transition Economies; What Scope for Real Appreciation?," IMF Working Papers 97/149, International Monetary Fund.
- Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers 16, Center for Policy Research, Maxwell School, Syracuse University.
- Uwe Dulleck & Neil Foster & Robert Stehrer & Julia Woerz, 2005. "Dimensions of quality upgrading," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 51-76, 01.
- Michel Aglietta & Camille Baulant & Sandra Moatti, 2003. "Les PECO devant la tentation de l'euro," Economie Internationale, CEPII research center, issue 93, pages 11-36.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2004-676. 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: (Laurie Gendron)
If references are entirely missing, you can add them using this form.