Sustainable Real Exchange Rates in the New Eu Member States: What Did the Great Recession Change?

By Katerina Smídková, Jan Babecky, Ales Bulir

August 1, 2010

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Katerina Smídková, Jan Babecky, and Ales Bulir. Sustainable Real Exchange Rates in the New Eu Member States: What Did the Great Recession Change?, (USA: International Monetary Fund, 2010) accessed November 21, 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

The Great Recession affected export and import patterns in our sample countries, and these changes, coupled with a more volatile external environment, have profound impact on our estimates of real exchange rate misalignments and projections of sustainable real exchange rates. We find that real misalignments in several countries with pegged exchange rates and excessive external liabilities widened relative to earlier estimates. While countries with balanced net trade positions are expected to continue to experience appreciation during 2010-2014, several currencies are likely to require real depreciation to maintain sustainable net external debt. Our estimates point to somewhat larger disequilibria than those of IMF country teams, however, any estimates of equilibrium exchange rates are subject to sizable uncertainty.

Subject: Balance of payments, Exports, External debt, Foreign direct investment, Foreign exchange, International trade, Real exchange rates, Trade balance

Keywords: Computed SRER interval, Country-specific FDI elasticity, Debt target, Elasticity of export, Exports, FDI elasticity, FDI inflow, Foreign direct investment, Global, IMF team, New EU member states, Nontradable-sector FDI, Real exchange rates, SRER estimate, SRER projection, Sustainable exchange rates, Trade balance, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/198
Stock No:

WPIEA2010198
ISBN:

9781455205288
ISSN:

1018-5941

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