Towards the estimation of equilibrium exchange rates for transition economies: Methodological issues and a panel cointegration perspective

Maeso-Fernandez, Francisco; Osbat, Chiara; Schnatz, Bernd

doi:10.1016/j.jce.2006.05.003

Cited by 79 publications

(72 citation statements)

References 37 publications

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“…Thus, the computed real misalignment should be viewed as a medium-to long-term deviation. Outof-sample data 7 may include either a group of developed countries (e.g., Kim and Korhonen, 2002;Maeso-Fernandez et al, 2004;É gert et al, 2004b) or possibly all (market) economies in the world (e.g., Halpern and Wyplosz, 1997;Krajnyák and Zettelmeyer, 1998). Using out-of-sample data including developing countries implies that the equilibrium exchange rate of transition economies behaves like that in developed countries (with which transition economies are making an effort to catch up in 5 It is always convenient to code the alternative approaches relative to the one with most of the observations.…”

Section: Estimation Resultsmentioning

confidence: 99%

Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis

Égert

Halpern

2006

Journal of Banking & Finance

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This paper analyses the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis. The results indicate that the real misalignments reported in the literature are systematically influenced, inter alia, by the underlying theoretical concepts (Balassa-Samuelson effect, behavioral equilibrium exchange rate, fundamental equilibrium exchange rate) and by the econometric estimation methods. The important implication of these findings is that a systematic analysis is needed in terms of both alternative economic and econometric specifications to assess equilibrium exchange rates.

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Section: Estimation Resultsmentioning

confidence: 99%

Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis

Égert

Halpern

2006

Journal of Banking & Finance

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“…This is important given no single equilibrium exchange rate approach is problem free. A range of different econometric techniques, but based on one major theoretical approach, are employed in Crespo-Cuaresma, Fidrmuc and MacDonald (2005), and Maeso-Fernandez, Osbat and Schnatz (2004). Yet, we lack, at present, a comprehensive study, which explores all dimensions (theoretical, econometric, time series vs. panel) of the assessment of equilibrium exchange rates for transition, developing and fully developed economies.…”

Section: Discussionmentioning

confidence: 99%

Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues

2005

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In this paper we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc. In particular, we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how useful they are likely to be for the transition economies. Amongst our findings is the result that the trend appreciation usually observed for the exchange rates of these economies is affected by factors other than the usual Balassa-Samuelson effect, such as the behaviour of the real exchange rate of the open sector and regulated prices. We then consider three main sources of uncertainty relating to the implementation of an equilibrium exchange rate model, namely: differences in the theoretical underpinnings; differences in the econometric estimation techniques; and differences relating to the time series and cross-sectional dimensions of the data. The ensuing three-dimensional space of real misalignments is probably a useful tool in determining the direction of a possible misalignment rather than its precise size.JEL: C15, E31, F31, O11, P17.

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“…Following the approach by Chudik and Mongardini (2007) and Maeso-Fernandez et al (2004), we did the same estimation by using dynamic heterogeneous panel methods from an Error Correction Model setup.…”

Section: Annex 2: the Dynamic Setupmentioning

confidence: 99%

Long-Run Determinants and Misalignments of the Real Effective Exchange Rate in the EU

Comunale

2015

SSRN Journal

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Exchange rate assessment is becoming increasingly relevant for economic surveillance in the EU. The persistence of different wage and productivity dynamics among EMU countries or EU members with a fixed exchange regime with euro, coupled with the impossibility of correcting competitiveness differentials via the adjustment of nominal rates, have resulted into divergent dynamics in Real Effective Exchange Rates. This paper explores the role of economic fundamentals in explaining medium/long-run movements in the Real Effective Exchange Rates in the European Union over the period 1994-2012 by using heterogeneous, cointegrated panel frameworks in static and dynamic terms. In addition, the paper provides an analysis of the misalignments of the rate for each member state based on the "equilibrium" measure calculated from the permanent component of the fundamentals (BEER). The misalignments in EU28 are huge and the patterns differ significantly among groups. Therefore, despite the influence of the fundamentals is quite similar, the differences in the transfer variable (which affect the BEER) and in the actual Real Effective Exchange Rate are key. The core countries have been undervalued for almost the whole period, which entails from an important increase in competitiveness for those countries. Instead the periphery has experienced high rates, especially in Portugal. In addition, the behavior of CEECs is driven, as expected, by the transition process and influenced by the criteria to the accession to the EU. The misalignments in this case are still extremely wide and reflect these phenomena.

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Towards the estimation of equilibrium exchange rates for transition economies: Methodological issues and a panel cointegration perspective

Cited by 79 publications

References 37 publications

Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis

Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis

Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues

Long-Run Determinants and Misalignments of the Real Effective Exchange Rate in the EU

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