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Some Exchange Rates Are More Stable than Others: Short-Run Evidence from Transition Countries

Ales Bulir ()

Working Papers from Czech National Bank, Research Department

Abstract: The paper investigates empirically the endogenous liquidity nexus of exchange rate determination on a sample of four transition economies. We find evidence in favor of the hypothesis of a nonlinear error correction process vis-a-vis longer-term trend deviations. The results suggest that early and successful exchange-rate market and financial-account liberalization pays off in terms of depth of the market and, hence, faster adjustment of national currencies to short-term shocks to the exchange rate.

Keywords: Exchange rate; endogenous liquidity; error-correction mechanism; nonlinearity. (search for similar items in EconPapers)
JEL-codes: F31 F33 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-tra
Date: 2003-06
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2003/05

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