Real exchange rate misalignments in CEECs: Have they hindered growth?
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Real exchange rate misalignments in CEECs: Have they hindered growth?Date
2020Citation
Cuestas, J. C.; Mourelle, E.; Regis, P. J. (2020). Real exchange rate misalignments in CEECs: Have they hindered growth? Empirica. Journal of European Economics, 47 (4), 733-756. DOI: https://doi.org/10.1007/s10663-019-09454-5
Abstract
[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
Growth
Central and Eastern European countries
Panel smooth transition regression
Editor version
ISSN
0340-8744