Real exchange rate misalignments in CEECs: Have they hindered growth?
Juan Carlos Cuestas,
Estefanía Mourelle and
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Juan Carlos Cuestas: Eesti Pank
Estefanía Mourelle: Universidade da Coruña
Empirica, 2020, vol. 47, issue 4, No 2, 733-756
Abstract We study the impact of exchange rate misalignment on economic activity in nine Central and Eastern European economies. Exchange rate misalignments are computed from country-specific long-run exchange rate relationships with determinants suggested by open macroeconomic models such as interest rate differentials or the Balassa–Samuelson effect. There was a clear reduction in misalignments, but this has been reversed to some extent after 2008. Exchange rate overvaluation has a negative impact on economic activity. The effect of misalignments on economic activity seems to be nonlinear, as overvaluation has a stronger effect than undervaluation. Other factors of economic activity, including institutions, also show nonlinear effects.
Keywords: Real exchange rate misalignments; Growth; Central and Eastern European countries; Panel smooth transition regression (search for similar items in EconPapers)
JEL-codes: O11 F41 F15 (search for similar items in EconPapers)
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