Competitiveness in Bulgaria: An Assessment of the Real Effective Exchange Rate
25 Pages Posted: 12 Feb 2006
Date Written: March 2004
This paper presents an empirical analysis of the medium and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate that the RER is driven by fundamentals, including labor productivity, terms of trade, world real interest rates, gross savings, and foreign direct investment. The model also shows that there is no significant misalignment of the Bulgarian lev.
Keywords: Real effective exchange rates, Fundamental determinants, NATREX, BEER, Bulgaria, Competitiveness
JEL Classification: F31, F41
Suggested Citation: Suggested Citation