Revisiting the asymmetric impacts of the exchange market pressure on the inflation, interest rate and foreign trade balance in Eastern Europe

Oguzhan Ozcelebi (), Kaya Tokmakcioglu () and Emre Su ()
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Oguzhan Ozcelebi: Istanbul University
Kaya Tokmakcioglu: Istanbul Technical University
Emre Su: Istanbul Technical University

Empirical Economics, 2021, vol. 61, issue 5, No 8, 2517-2538

Abstract: Abstract This study examines the relationship between the exchange market pressure (EMP) and macroeconomic and financial variables for Eastern European countries. The increase/decrease in the EMP influences the probability of a currency crisis, while this phenomenon may negatively/positively affect the foreign trade balance and may obstruct/facilitate foreign debt service in the Czech Republic and Poland due to the need for imported inputs for domestic production. We also consider that the effects of EMP can be asymmetrical and be opposed to regimes changes; furthermore, we find for the Czech Republic, Hungary, and Poland that changes in the EMP may affect the probability of a broad financial crisis.

Keywords: EMP; Asymmetry; Qual VAR; Nonlinear VAR (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00181-020-01965-6

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