Several transition countries have experienced strong real exchange rate appreciations.This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector.Using panel data over the period 1993 98, the results show clear evidence of...

What can explain the persistent fluctuations observed in non-fixed exchange rates? We use a version of the Kareken-Wallace two-country overlapping generations model to explain this empirical phenomenon. The agents use an adaptive learning rule to forecast expected prices in both countries...

Usually cointegrated VAR models of wage formation are analysed in a wage-price setup. However, theoretical wage bargaining models provide the background for a wage-employment setup. The two relations of interest are the labour demand equation from the profit maximizing firms and the (bargained)...