TY - JOUR
T1 - Real exchange rate misalignments in CEECs
T2 - Have they hindered growth?
AU - Cuestas, Juan Carlos
AU - Mourelle, Estefanía
AU - Regis, Paulo José
N1 - Publisher Copyright:
© 2019, Springer Science+Business Media, LLC, part of Springer Nature.
PY - 2020/11/1
Y1 - 2020/11/1
N2 - We study the impact of exchange rate misalignment on economic activity in nine Central and Eastern European economies. Exchange rate misalignments are computed from country-specific long-run exchange rate relationships with determinants suggested by open macroeconomic models such as interest rate differentials or the Balassa–Samuelson effect. There was a clear reduction in misalignments, but this has been reversed to some extent after 2008. Exchange rate overvaluation has a negative impact on economic activity. The effect of misalignments on economic activity seems to be nonlinear, as overvaluation has a stronger effect than undervaluation. Other factors of economic activity, including institutions, also show nonlinear effects.
AB - We study the impact of exchange rate misalignment on economic activity in nine Central and Eastern European economies. Exchange rate misalignments are computed from country-specific long-run exchange rate relationships with determinants suggested by open macroeconomic models such as interest rate differentials or the Balassa–Samuelson effect. There was a clear reduction in misalignments, but this has been reversed to some extent after 2008. Exchange rate overvaluation has a negative impact on economic activity. The effect of misalignments on economic activity seems to be nonlinear, as overvaluation has a stronger effect than undervaluation. Other factors of economic activity, including institutions, also show nonlinear effects.
KW - Central and Eastern European countries
KW - Growth
KW - Panel smooth transition regression
KW - Real exchange rate misalignments
UR - http://www.scopus.com/inward/record.url?scp=85069174671&partnerID=8YFLogxK
U2 - 10.1007/s10663-019-09454-5
DO - 10.1007/s10663-019-09454-5
M3 - Article
AN - SCOPUS:85069174671
SN - 0340-8744
VL - 47
SP - 733
EP - 756
JO - Empirica
JF - Empirica
IS - 4
ER -