Exchange Rates in the New EU Accession Countries: What Have We Learned from the Forerunners?

February 1, 2005

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Format: Chicago

Katerina Smídková, and Ales Bulir. Exchange Rates in the New EU Accession Countries: What Have We Learned from the Forerunners?, (USA: International Monetary Fund, 2005) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Estimation and simulation of sustainable real exchange rates in some of the new EU accession countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued in 2003. Simulations, conditional on large-model macroeconomic projections, suggest that under current policies those currencies would be unlikely to stay within the ERM2 stability corridor during 2004-10. In-sample simulations for Greece, Portugal, and Spain indicate both a much smaller misalignment of national currencies prior to ERM2, and a more stable path of real exchange rates over the medium term than can be expected for the new accession countries.

Subject: Currencies, Exchange rates, External debt, Foreign direct investment, Real exchange rates

Keywords: Capital stock, Exchange rate, Nominal exchange rate, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/027
Stock No:

WPIEA2005027
ISBN:

9781451860467
ISSN:

1018-5941

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