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N° 2004-15 |
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| November 2004 |
| The Stock-Flow Approach to the Real
Exchange Rate of CEE Transition Economies |
Balazs Egert
Amina Lahrèche-Révil
Kirsten Lommatzsch |
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| This paper investigates the determinants
of equilibrium real exchange rates for the new EU member states and candidate
countries, relying on an asset model inspired by Aglietta et al. (1998) and Alberola
et al. (1999, 2002). The impact of productivity gains on both the Balassa-Samuelson
effect and the behaviour of the tradable real exchange rate is especially assessed.
Subdividing the panel into sub-panels, we show that the B-S effect is a common
feature to all economies, but that the tradable price-based real appreciation
is a distinct feature of transition and emerging economies. We also show that
in transition countries, a decrease in net foreign assets leads to an appreciation
of the real exchange rate, instead of the depreciation predicted by theory. Comparing
in-sample and out-of-sample estimates (in terms of the country coverage) of equilibrium
exchange rates shows that these measures can yield different results, and could
therefore be considered as complementary tools in judging misalignments. |
Abstract |
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| Real equilibrium exchange rate, EU enlargement,
Balassa-Samuelson effect, productivity, net foreign assets, out-of sample panel |
Keywords |
| C15, E31, F31, O11, P17 |
JEL classification |
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