Transition economy convergence in a two-country model - implications for monetary integration

Jan Bruha () and Jiri Podpiera

No 740, Working Paper Series from European Central Bank

Abstract: In this paper we present a two-country dynamic general equilibrium model of ex ante unequally developed countries. The model explains a key feature recently observed in transition economies – the long-run trend real exchange rate appreciation – through investments into quality. Our exchange-rate projections bear important policy implications, which we illustrate on the collision between the price and nominal exchange rate criterion for the European Monetary Union in a set of selected transition economies in Central and Eastern Europe. JEL Classification: E58, F15, F43.

Keywords: Two-country modeling; Convergence; Monetary Policy; Currency area. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
Date: 2007-03
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