Modelling the slow mean-reversion of the Central and Eastern European countries ' real exchange rates

Abstract : In this paper we propose a new modelling approach of the exchange rate misalignments in four transition countries: Hungary, Poland, Slovakia and Slovenia. We provide an empirical framework that takes into account two characteristics of these misalignments: while the fundamentals and policies adjust to restore equilibrium towards the long-term exchange rate, there are factors that hinder a fast mean-reverting dynamics. When the exchange rates adjust slowly to their equilibrium long-run values, the standard regressions that assume zero-mean misalignments present some drawbacks and one needs a model that helps to capture the time-varying aspects of the misalignment dynamics. The model proposed in this paper reproduces well the periods of overvaluation and undervaluation observed in the four countries.
Document type :
Journal articles
Complete list of metadatas

https://hal-upec-upem.archives-ouvertes.fr/hal-00693052
Contributor : Admin Erudite <>
Submitted on : Tuesday, May 1, 2012 - 7:47:06 PM
Last modification on : Wednesday, September 4, 2019 - 1:52:12 PM

Identifiers

  • HAL Id : hal-00693052, version 1

Collections

Citation

Gilles Dufrenot, Elisabeth Grimaud, Eugenie Latil, Valerie Mignon. Modelling the slow mean-reversion of the Central and Eastern European countries ' real exchange rates. Manchester School, Wiley, 2008, 76 (1), pp.21--43. ⟨hal-00693052⟩

Share

Metrics

Record views

248