The Monetary Approach to Exchange Rates in the Ceecs

27 Pages Posted: 6 Feb 2004

See all articles by Jarko Fidrmuc

Jarko Fidrmuc

Zeppelin University Friedrichshafen

Jesús Crespo Cuaresma

University of Innsbruck - Department of Economic Theory, Economic Policy and Economic History

Ronald MacDonald

University of Strathclyde in Glasgow - Department of Economics; Government of New Zealand - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2004

Abstract

A panel data set for six Central and Eastern European countries (the Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) is used to estimate the monetary exchange rate model with panel cointegration methods, including the Pooled Mean Group estimator, the Fully Modified Least Square estimator and the Dynamic Least Square estimator. The monetary model is able to convincingly explain the long-run dynamics of exchange rates in CEECs, particularly when this is supplemented by a Balassa-Samuelson effect. We then use our long-run monetary estimates to compute equilibrium exchange rates. Finally, we discuss the implications for the accession of selected countries to the European Economic and Monetary Union.

Keywords: Exchange rates, monetary model, panel unit root tests, panel cointegration, EMU

JEL Classification: C33, F31, F36

Suggested Citation

Fidrmuc, Jarko and Crespo Cuaresma, Jesús and MacDonald, Ronald R., The Monetary Approach to Exchange Rates in the Ceecs (January 2004). William Davidson Institute Working Paper No. 642; BOFIT Discussion Paper No. 14/2003. Available at SSRN: https://ssrn.com/abstract=494762 or http://dx.doi.org/10.2139/ssrn.494762

Jarko Fidrmuc (Contact Author)

Zeppelin University Friedrichshafen ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

Jesús Crespo Cuaresma

University of Innsbruck - Department of Economic Theory, Economic Policy and Economic History ( email )

Universitaetsstrasse 15
Innsbruck, A - 6020
Austria

Ronald R. MacDonald

University of Strathclyde in Glasgow - Department of Economics ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
+44 141 548 3861 (Phone)

Government of New Zealand - Department of Economics

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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