Interpreting Real Exchange Rate Movements in Transition Countries

May 1, 2001

Preview Citation

Format: Chicago

Interpreting Real Exchange Rate Movements in Transition Countries, (USA: International Monetary Fund, 2001) accessed December 27, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Several transition countries have experienced strong real exchange rate appreciations. This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector. Using panel data over the period 1993-98, the results show clear evidence of productivity-driven exchange rate movements in the central and eastern European and Baltic countries. Transition countries, particularly the EU accession countries that have begun to catch up, can expect to experience further productivity-driven real exchange rate appreciations. Evidence from a large cross-section of non-transition countries indicates that catching up by one percent will be associated with a 0.4 percent real appreciation.

Subject: Exchange rates, Foreign exchange, Industrial productivity, Production, Productivity, Real effective exchange rates, Real exchange rates

Keywords: Balassa-Samuelson effects, Baltics, Eastern Europe, Exchange rate gap, Exchange rates, Industrial productivity, Labor productivity data, Nominal exchange rate, PPP exchange rate, Productivity, Productivity variable, Real effective exchange rates, Real exchange rates, Transition, Vis-à-vis productivity, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/056
Stock No:

WPIEA0562001
ISBN:

9781451847703
ISSN:

1018-5941

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