Effective Exchange Rates in Central and Eastern European Countries: Cyclicality and Relationship with Macroeconomic Fundamentals

Daniel Stavarek and Cynthia Miglietti ()
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Cynthia Miglietti: Department of Applied Sciences, Firelands College, Bowling Green State University

No 2014-49, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: This paper provides direct empirical evidence on the nature of the relationship between effective exchange rates and selected macroeconomic fundamentals in nine central and Eastern European countries. Therefore, the paper addresses a key precondition of numerous exchange rate determination models and theories that will explain the role of exchange rates in the economy. Additionaly, short-term volatility and medium-term variability of effective exchange rates are examined. The results suggest that flexible exchange rate arrangements are reflected in higher volatility and variability of nominal as well as real effective exchange rates. Furthermore, the results provide mixed evidence in intensity, direction and cyclicality but show a weak correlation between exchange rates and fundamentals. Sufficiently high coefficients are found only for the money supply. Consequently, using fundamentals for the determination of exchange rates and using the exchange rate for an explanation of economic development can be limited for the countries analyzed.

Keywords: effective exchange rates; volatility; variability; cycle; high/low analysis; peak/trough analysis; cross correlation (search for similar items in EconPapers)
JEL-codes: E32 E44 F31 (search for similar items in EconPapers)
Pages: 25
Date: 2014-10
New Economics Papers: this item is included in nep-cba, nep-mac, nep-opm and nep-tra
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http://ftp.mendelu.cz/RePEc/men/wpaper/49_2014.pdf Full text (application/pdf)

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Journal Article: Effective Exchange Rates in Central and Eastern European Countries: Cyclicality and Relationship with Macroeconomic Fundamentals (2015)
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