Equilibrium Exchange Rates in the Transition: The Tradable Price-Based Real Appreciation and Estimation Uncertainty

Balázs Égert and Kirsten Lommatzsch ()

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Poland, Slovakia and Slovenia. A theoretical model is developed that provides an explanation for the appreciation of the real exchange rate based on tradable prices in the acceding countries. Our model can be considered as a competing but also completing framework to the traditional Balassa-Samuelson model. With this as a background, alternative cointegration methods are applied to time series (Engle-Granger, DOLS, ARDL and Johansen) and to three small-size panels (pooled and fixed effect OLS, DOLS, PMGE and MGE), which leaves us with around 5,000 estimated regressions. This enables us to examine the uncertainty surrounding estimates of equilibrium real exchange rates and the size of the underlying real misalignments.

Keywords: Real Exchange Rate; Equilibrium Exchange Rate; Tradable Prices; Transition; Cointegration (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2004-04-01
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Chapter: Equilibrium Exchange Rates in the Transition: The Tradable Price-Based Real Appreciation and Estimation Uncertainty (2005)
Working Paper: Equilibrium exchange rates in the transition: the tradable price-based real appreciation and estimation uncertainty (2004)
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