Frait, Jan and Komárek, Luboš (2001) Real exchange rate trends in transitional countries. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

The paper presents an analysis of the determinants of the real exchange rate with emphasis on its long-term aspects and searching for the equilibrium paths. It introduces the behavioural models of exchange rates (especially the BEER and the NATREX), that are alternatives to the often-used fundamental models of the FEER type. Authors constructed the theoretical and econometric behavioural model, which could analyse the medium-term and long-term dynamics of the real exchange rate. This paper also introduces real exchange rate as an indicator of convergence for transitional countries to EU countries and analyses the link between real exchange rate and double speed economy or deindustrialisation, respectively. This analysis is relevant almost for all transitional countries now. The paper explains the appreciation trend of real exchange rates in transitional economies. It is identifying the set of factors that let to sustainable real appreciation of the Czech Koruna and also the set of factors that possibly caused unsustainable real depreciation in the past. There is also a set of arguments against any other rapid real appreciation of the Czech Koruna. The paper also tried to fuel these arguments by an econometric analysis, which used our behavioural model of the equilibrium real exchange rate. It was shown that the Czech real exchange rate was especially determined by real fundamental factors: productivity, terms of trade and world interest rates and foreign direct investment.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HJ Public Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Foreign exchange rates, Equilibrium (Economics), Money -- Czech Republic, Development economics -- Czech Republic, Czech Republic -- Economic conditions
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	July 2001
Number:	No.596
Number of Pages:	35
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Grantová agentura České republiky [Grant Agency of the Czech Republic] (GACR)
Grant number:	GA402/00/1213 (GACR)
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URI:	http://wrap.warwick.ac.uk/id/eprint/1585

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