Competitiveness in Bulgaria: An Assessment of the Real Effective Exchange Rate

Piritta Sorsa and Dimitar Chobanov

No 2004/037, IMF Working Papers from International Monetary Fund

Abstract: This paper presents an empirical analysis of the medium- and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate that the RER is driven by fundamentals, including labor productivity, terms of trade, world real interest rates, gross savings, and foreign direct investment. The model also shows that there is no significant misalignment of the Bulgarian lev.

Keywords: WP; exchange rate; RER.; saving; Real effective exchange rates; Fundamental determinants; NATREX; BEER; Bulgaria; Competitiveness; productivity differential; Bulgarian lev; productivity development; terms of trade index; overvalued exchange RER; productivity data; Real exchange rates; Productivity; Foreign direct investment; Terms of trade (search for similar items in EconPapers)
Pages: 25
Date: 2004-03-01
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Citations: View citations in EconPapers (12)

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