Sources of real exchange rate fluctuations in transition economies: The case of Ploand and Hungary

Selahattin Dibooglu and Ali Kutan

No B 14-2000, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies

Abstract: This paper examines Brada‘s (1998) conjecture about the path of real exchange rates in two successful transition economies, Hungary and Poland. He argues that, as a result of the very diverse fiscal and monetary policies to be found among these economies, real exchange rates in some economies should follow a path that mirrors mainly the effect of real shocks and others a path reflecting the monetary shocks. To test this hypothesis, we use a popular structural VAR model and, assuming long-run neutrality of nominal shocks, we decompose real exchange rate and price movements into those attributable to real and nominal shocks. Using monthly data from 1990 to 1999 for Hungary and Poland, we find that nominal shocks had a major influence in explaining real exchange rate movements in Poland, while real shocks had a larger influence on real exchange rate movements in Hungary.

Keywords: nominal and real exchange rates; inflation; transition economies; structural VARs; exchange rate regimes; exchange rate modeling (search for similar items in EconPapers)
JEL-codes: C5 F3 P5 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zeiwps:b142000

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