This paper studies the Balassa-Samuelson effect in the Czech Republic, Hungary, Poland, Slovakia and Slovenia. Time series and panel cointegration techniques are used to show that the BS effect works reasonably well in these transition economies during the period 1991:Q1 to 2001:Q2. However,...

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...

Current account crises in emerging markets are characterized by large increases in interest rates, big drops in output, and large real currency depreciations. Current models of crisis with financial frictions do not generate very large movements in these variables. Recent work has shown that the...

This paper tests for long run PPP using a nonstationary panel regression framework that can accommodate both permanent and temporary shocks. It also uses the common correlated estimator of Pesaran (2003a) to take account of cross sectional dependence. The PPP null in our framework is a unit...

This paper provides evidence of long run purchasing power parity by performing a recently developed method to test for unit roots in the presence of structural breaks. Data consist of real exchange rate series for 20 countries including developed and developing economies. Structural breaks are...

This paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Poland, Slovakia and Slovenia. A theoretical model is developed that provides an explanation for the appreciation of the real exchange rate based on tradable prices in the acceding countries. Our...

The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts. The response of a small country's real exchange rate to various shocks is derived in a...

Many central banks, particularly in the developing world, aim for exchange rate stability as a macroeconomic goal. However, most are reluctant to relinquish monetary policy autonomy, so they end up operating through both interest rate and foreign exchange interventions. But the use of multiple...