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Volume 62, Issue 3

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Sustainable Real Exchange Rates in the New EU Member States: What Did the Great Recession Change?

Babecký, Jan; Bulíř, Aleš; Šmídková, Kateřina

Year: 2012   Volume: 62   Issue: 3   Pages: 226-251

Abstract: The Great Recession affected export and import patterns in our sample of new EU member countries, and these changes, coupled with a more volatile external environment, have a profound impact on our estimates of real exchange rate misalignments and projections of sustainable real exchange rates. We find that real misalignments in several countries with pegged exchange rates and excessive external liabilities widened relative to earlier estimates. While countries with balanced net trade positions may experience sustainable appreciation during 2010–2014, several currencies are likely to require real depreciation to maintain sustainable net external debt.

JEL classification: F31, F33, F36, F47

Keywords: foreign direct investment, Great Recession, new EU member states, sustainable exchange rates

RePEc: http://ideas.repec.org/a/fau/fauart/v62y2012i3p226-251.html

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