Maintaining Competitiveness Under Equilibrium Real Appreciation: The Case of Slovakia

30 Pages Posted: 3 Mar 2006

See all articles by Nienke Oomes

Nienke Oomes

International Monetary Fund (IMF)

Date Written: March 2005

Abstract

This paper evaluates competitiveness in Slovakia and estimates the equilibrium real exchange rate for the koruna. Slovak wages and prices are found to have been relatively low even when adjusted for differences in relative income and productivity, suggesting an undervalued real exchange rate. However, recent rapid nominal appreciation has reduced most or all of this undervaluation and has brought the real exchange rate near or above equilibrium. The productivity-driven equilibrium real appreciation rate during 2005-09 is estimated at close to 3 percent per year but can be lower with the help of fiscal consolidation.

Keywords: Real exchange rate, competitiveness, Balassa-Samuelson, Slovakia

JEL Classification: F31, E31

Suggested Citation

Oomes, Nienke, Maintaining Competitiveness Under Equilibrium Real Appreciation: The Case of Slovakia (March 2005). IMF Working Paper No. 05/65, Available at SSRN: https://ssrn.com/abstract=888111

Nienke Oomes (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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