Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

Michael Frenkel; Isabell Koske

doi:10.1515/jbnst-2012-0204

Published by De Gruyter Oldenbourg March 16, 2016

Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

Michael Frenkel and Isabell Koske

From the journal Jahrbücher für Nationalökonomie und Statistik

https://doi.org/10.1515/jbnst-2012-0204

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Summary

This paper derives equilibrium real exchange rates for the EU member countries that joined in 2004 and in 2007. Our analysis is based on the natural real exchange rate approach and uses data for the period 1980-2007. We employ a two-step estimation strategy to deal with the limited availability and reliability of data from these countries. We first estimate the model for a panel of 17 OECD countries and then apply the estimated relationship to the new EU member countries. While the model does not support the appreciation of some of the examined currencies in 2005-2007, the development of several other currencies of the CEECs appears to be fairly in line with our NATREX estimates.

Keywords: Exchange rate models; EMU; EU enlargement

Online erschienen: 2016-3-16

Erschienen im Druck: 2012-4-1

Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

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