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N° 2002-15 |
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| December |
| Exchange Rate Regimes and Sustainable Parities
for CEECs in the Run-up to EMU Membership |
Virginie Coudert
Cécile Couharde |
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| The real exchange rates of CEECs have been
appreciating for the last decade, especially when measured by consumer prices.
We argue that the size of this appreciation is linked to the exchange rate regime,
the pegged currencies being more prone to this phenomenon in the long run. We
also show that this appreciation is not necessarily linked to overvaluation. First,
it is largely reduced when using a proxy of tradable prices as deflator, according
to the "Balassa-Samuelson effect". Second, we use a large sample of
emerging countries to calculate "normal" levels of real exchange rates
taking into account the "Balassa effect" and show that CEECs do not
suffer from systematic overvaluation according to this norm. We then calculate
Fundamental Equilibrium Exchange Rates, using a model of the foreign trade of
five CEECs (Czech Republic, Hungary, Poland, Slovak Republic and Slovenia) and
their main partners based on NIGEM. We show that these CEEC currencies only have
very small misalignment. This is due to the fact that the response of their foreign
trade to small changes in the exchange rate |
Abstract |
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| Fundamental equilibrium exchange rates, EU
accession, transition |
Keywords |
| F33, E42 |
JEL classification |
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