Real exchange rate misalignments in CEECs: Have they hindered growth?

Cuestas, Juan Carlos; Mourelle, Estefanía; Regis, Paulo José

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http://hdl.handle.net/2183/35778

Real exchange rate misalignments in CEECs: Have they hindered growth?

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Mourelle_Estefania_2020_Real_exchange.pdf (523.22 KB)

Identifiers

URI: http://hdl.handle.net/2183/35778

DOI: 10.1007/s10663-019-09454-5

Publication date

2020

Authors

Cuestas, Juan Carlos

Mourelle, Estefanía

Regis, Paulo José

Bibliographic citation

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.