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Real Exchange Rates in Small Open OECD and Transition Economies: Comparing Apples with Oranges?Balázs ÉgertOrganization for Economic Co-Operation and Development (OECD); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Université Paris X Nanterre - Department of Economics; William Davidson Institute Kirsten LommatzschGerman Institute for Economic Research (DIW Berlin) Amina Lahreche-RevilCEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; University of Amiens; Université Paris I Panthéon-Sorbonne - TEAM February 2007 CESifo Working Paper Series No. 1928 William Davidson Institute Working Paper No. 859 Abstract: We find that productivity gains in tradables cause an appreciation of the real exchange rate via both tradable and nontradable prices in the CEE-5 and have no affect in the Baltic countries, while they lead to a depreciation of the real exchange rate of tradables in OECD economies that overcompensates the appreciation due to nontradable prices. Rising net foreign liabilities lead to a real appreciation in the Baltic countries instead of the expected depreciation found in OECD and CEE-5 countries. These differences are due to the different impact of the fundamentals on the real exchange rate depending on the time horizon studied.
Number of Pages in PDF File: 21 Keywords: real exchange rate, equilibrium exchange rate, productivity, tradables, Balassa-Samuelson effect JEL Classification: C15, E31, F31, O11, P17 working papers seriesDate posted: March 7, 2007Suggested CitationContact Information
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