Discussion Paper Details

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

Author(s): Balázs Égert, László Halpern and Ronald MacDonald

Publication Date: December 2004

Keyword(s): Balassa-Samuelson effect, equilibrium exchange rate, Purchasing Power Parity, tradable prices and transition economies

Programme Area(s): Institutions and Economic Performance

Abstract: In this Paper we present an overview of a number of issues relating to the equilibrium exchange rates of the new EU member states from Central and Eastern Europe. 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 new member states. We then consider some methodological issues, relating to the implementation of an equilibrium exchange rate model for new member states, such as the speed with which equilibrium exchange rates change and issues of implementation. Finally, we present an overview of the various extant measures of equilibrium that have been calculated for the new member states.

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Bibliographic Reference

Égert, B, Halpern, L and MacDonald, R. 2004. 'Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues'. London, Centre for Economic Policy Research.