REAL Exchange rate trends in transitional countries

Jan Frait () and Lubos Komarek ()

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: The paper presents an analysis of the determinants of the real exchange rate with emphasis on its long-term aspects and searching for the equilibrium paths. It introduces the behavioral models of exchange rates (especially the BEER and the NATREX), that are alternatives to the often-used fundamental models of the FEER type. Authors constructed the theoretical and econometric behavioral model, which could analyze the medium-term and long-term dynamics of the real exchange rate. This paper also introduces real exchange rate as an indicator of convergence for transitional countries to EU countries and analyses the link between real exchange rate and double speed economy or deindustrialization, respectively. This analysis is relevant almost for all transitional countries now. The paper explains the appreciation trend of real exchange rates in transitional economies. It is identifying the set of factors that let to sustainable real appreciation of the Czech Koruna and also the set of factors that possibly caused unsustainable real depreciation in the past. There is also a set of arguments against any other rapid real appreciation of the Czech Koruna. The paper also tried to fuel these arguments by an econometric analysis, which used our behavioral model of the equilibrium real exchange rate. It was shown that the Czech real exchange rate was especially determined by real fundamental factors: productivity, terms of trade and world interest rates and foreign direct investment.

Keywords: REAL EXCHANGE RATE; TRANSITION; CHEZCH REPUBLIC; COMPETITIVENESS (search for similar items in EconPapers)
JEL-codes: E58 E65 F31 F41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Working Paper: Real exchange rate trends in transitional countries (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:596

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