Real exchange rate misalignments in CEECs: have they hindered growth?

Juan Cuestas, Estefania Mourelle and Paulo Regis

No wp2018-05, Bank of Estonia Working Papers from Bank of Estonia

Abstract: We study the impact of exchange rate misalignment on economic activity in nine Central and Eastern European (CEE) 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: F15 F41 O11 (search for similar items in EconPapers)
Date: 2019-01-23, Revised 2019-01-23
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Citations: View citations in EconPapers (4)

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Journal Article: Real exchange rate misalignments in CEECs: Have they hindered growth? (2020)
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