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The Real Exchange Rate Misalignment in the Five Central European Countries

  • Frait, Jan

    (Czech National Bank, Prague)

  • Komarek, Lubos

    (Czech National Bank, Prague)

  • Meleck, Martin

    (University of New South Wales, Sydney)

The paper focuses on the developments of real exchange rates and their fundamental determinants in the five new EU Member States (Czech Republic, Hungary, Poland, Slovakia, and Slovenia). First, the approaches that can be used for estimation of equilibrium real exchange rates are briefly discussed. Then, we use well-established determinants of real exchange rates associated with the behavioral equilibrium exchange rate (BEER) approach to assess misalignments of the real exchange rates for the five new EU Member States. The estimates of the equilibrium exchange rates are obtained by means of both purely statistical approaches (HP filter, band-pass filter) and applying several multivariate estimation methods to our reduced-form BEER model. The results obtained indicate that the tendency towards appreciation of real exchange rates in the economies under consideration have been driven primarily by fundamental determinants.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp_739.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 739.

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Length: 33 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:739
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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