Estimates of Fundamental Real Echange Rates for the Five EU Pre- Accession Countries
Are there indications of the real exchange rate misalignment in the case of five pre-accession countries? Will in these countries stable real exchange rates, required by the two of Maastrich criteria, be in line with economic fundamentals in the pre-EMU period? In order to analyse these questions, we employ the concept of fundamental real exchange rate (FRER) that reflects well specific features of countries in the advanced stage of transition. The FRER model approximates the integration gain by the impact of foreign direct investment on trade and it allows for larger current account deficits if external debt is below safety limit. Model coefficients are calibrated according to our previous econometric work. Sensitivity tests are used to deal with uncertainty about baseline assumptions. According to the FRERs, there were signs of overvaluation for all pre-accession economies, with the exception of Slovenia, in the end of 2001. The second main finding relates to the feasibility of stable real exchange rates in the pre-EMU period. The stability of the real exchange rates will not be automatically in line with economic fundamentals in the forthcoming period and, moreover, FRERs do not move in one direction in all pre-accession countries. This finding suggests that certain flexibility of exchange rates will be needed in the forthcoming period.
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.:
- De Broeck, Mark & Slok, Torsten, 2006.
"Interpreting real exchange rate movements in transition countries,"
Journal of International Economics,
Elsevier, vol. 68(2), pages 368-383, March.
- Broeck, Mark De & Sløk, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition.
- International Monetary Fund, 2001. "Interpreting Real Exchange Rate Movements in Transition Countries," IMF Working Papers 01/56, International Monetary Fund.
- Katerina Smidkova, 2003.
"Koruna Exchange Rate Turbulence in May 1997,"
- Katerina Smidkova & Jiri Behounek & Tibor Hledik & Josef Jilek & Miroslav Kostel & Ivana Matalikova & Dana Rottova & Jana Stankova, 1998. "Koruna Exchange Rate Turbulence in May 1997," Archive of Monetary Policy Division Working Papers 1998/02, Czech National Bank.
- John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
- Barrell, Ray & Wren-Lewis, Simon, 1989. "Fundamental Equilibrium Exchange Rates for the G7," CEPR Discussion Papers 323, C.E.P.R. Discussion Papers.
- Jan Frait & Luboš Komárek, 2001. "On the Way to European Union: Nominal and Real Convergence in Transition Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 51(6), pages 330-347, June.
- Milesi-Ferretti, G-M & Razin, A, 1996.
Princeton Studies in International Economics
81, International Economics Section, Departement of Economics Princeton University,.
- Milesi-Ferreti, Gian Maria & Razin, Assaf, 1996. "Current account sustainability," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34294, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Mark P. Taylor & Michael J. Artis, 1993. "Deer Hunting; Misalignment, Debt Accumulation, and Desired Equilibrium Exchange Rates," IMF Working Papers 93/48, International Monetary Fund.
- Pain, Nigel & Wakelin, Katharine, 1998. "Export Performance and the Role of Foreign Direct Investment," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(0), pages 62-88, Supplemen.
- Emil Stavrev, 2000. "Monetary and Fiscal Policies' Efficiency and the Determination of a Nominal Equilibrium Exchange Rate," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 50(9), pages 452-463, September.
- Steven A. Symansky & Peter B. Clark & Leonardo Bartolini & Tamim Bayoumi, 1994. "Exchange Rates and Economic Fundamentals; A Framework for Analysis," IMF Occasional Papers 115, International Monetary Fund.
- Carsten Detken & Alistair Dieppe & Jérôme Henry & Frank Smets & Carmen Marin, 2002. "Determinants of the Effective Real Exchange Rate of the Synthetic Euro: Alternative Methodological Approaches," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 404-436, December.
- Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, International Monetary Fund.
- 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.
- 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.
- Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-86, November.
- Dr Martin Weale, 1998. "UK Consumption in the long run: the determinants of consumer spending 1925-1995," NIESR Discussion Papers 138, National Institute of Economic and Social Research.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0303016. 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: (EconWPA)
If references are entirely missing, you can add them using this form.