Equilibrium Exchange Rates in Transition Economies

Lionel Halpern and Charles Wyplosz

No 1996/125, IMF Working Papers from International Monetary Fund

Abstract: A stylized fact of the transition process is an early profound exchange rate depreciation followed by continuing real appreciation. Absent historical reference points, it is difficult to judge whether the real appreciation is threatening competitiveness. This paper interprets the stylized facts and offers estimates of the equilibrium real exchange rate based on an international comparison of dollar wages and on a study of the dynamics of real exchange rates in several transition economies. The results suggest that the process of real appreciation is a combination of a return to equilibrium following the early overshooting and equilibrium appreciation.

Keywords: WP; nominal exchange rate; rate of exchange; managed float; dollar wage; rate depreciation; rate appreciation; exchange rate regime; equilibrium exchange rates; undervalued exchange rate; inflation rate; Real exchange rates; Exchange rates; Wages; Inflation; Current account; Africa; Central and Eastern Europe; Asia and Pacific; Southeast Asia; Western Europe (search for similar items in EconPapers)
Pages: 40
Date: 1996-11-01
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Citations: View citations in EconPapers (111)

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Journal Article: Equilibrium Exchange Rates in Transition Economies (1997)
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