Equilibrium Exchange Rates in Transition Countries
We make use of a dynamic heterogeneous panel model to estimate real equilibrium exchange rates for high level transition countries. Our method is dependant on out-of-sample estimations from middle-income and high-income countries, and we make use of a pooled mean group estimator. We discover that exchange rates have converged recently in five transition countries (Czech Republic, Hungary, Poland, Slovakia, and Slovenia) with real equilibrium exchange rates expressed in america dollars. However, we also discover that the currencies of the transition countries studied are substantially overvalued if real effective exchange rates are utilized…
Following high inflation in early transition, innovative transition countries achieved monetary stabilisation. Annual inflation rates in these countries today have been in single digits, even though still broadly speaking greater than within europe (EU). As EU membership approaches, however, new challenges emerge…
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Source: Bank of Finland, Institute for Economies in Transition
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