BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 15/2002:
Equilibrium Exchange Rates in Transition Countries: Evidence from Dynamic Heterogeneous Panel Models
Byung-Yeon Kim ()
and Iikka Korhonen ()
Abstract: We use a dynamic heterogeneous panel model to estimate
real equilibrium exchange rates for advanced transition countries. Our
method is based on out-of-sample estimations from middle-income and
high-income countries, and we use a pooled mean group estimator. We find
that exchange rates have converged in recent years in five transition
countries (Czech Republic, Hungary, Poland, Slovakia, and Slovenia) with
real equilibrium exchange rates expressed in the US dollars. However, we
also find that the currencies of the transition countries studied are
substantially overvalued if real effective exchange rates are used.
Keywords: exchange rates; transition economies; dynamic heterogeneous panel estimations; (follow links to similar papers)
JEL-Codes: C33; F31; P27; (follow links to similar papers)
33 pages, December 15, 2002
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