The impact of real exchange rates on price competitiveness in Eastern European countries
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Author(s)Nadiia ProskurninaLink to ORCID Index: https://orcid.org/0000-0001-8587-0467
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Jürgen Kähler
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Rosario Cervantes-MartinezLink to ORCID Index: https://orcid.org/0000-0002-1524-0379
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DOIhttp://dx.doi.org/10.21511/ed.19(1).2020.05
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Article InfoVolume 19 2020, Issue #1, pp. 45-55
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264 Downloads
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Creative Commons Attribution 4.0 International License
The subject of this paper is empirical research on studies of exchange rates in Eastern European countries, such as Albania, Bulgaria, Bosnia and Herzegovina, Belarus, Czech Republic, Estonia, Croatia, Hungary, Latvia, Lithuania, Moldova, (North) Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, and Slovenia, in order verify the validity of theories that explain these changes. This research aims to explain the mixed evidence of the Balassa-Samuelson effect in Ukraine, taking into account the intentions of Ukraine to become a member of the European Union. Unlike previous works, the attention is shifted to a review of empirical evidence and the identification of main factors that limit the ability to verify the theory. The main conclusion is that all the currencies studied underwent substantial real appreciations during the study period. Thus, it can be concluded that an adequate monetary policy in countries under study is very important, given that local exchange markets are not sustainable enough and the volatility of exchange operations is higher than in countries with developed economies. However, the Balassa-Samuelson Hypothesis (BSH) can explain the impact of the real exchange rate due to changes in productivity in countries in transition.
- Keywords
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JEL Classification (Paper profile tab)B27, C33, C58, E5, F36, F4
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References36
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Tables3
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Figures6
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- Figure 1. REERtCR for countries that introduced the euro
- Figure 2. REERtCR for EU countries with non-euro currencies
- Figure 3. REERtCR for non-EU countries
- Figure 4. QtPL for countries that introduced the euro
- Figure 5. QtPL for EU countries with non-euro currencies
- Figure 6. QtPL for non-EU countries
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- Table 1. Review of Egert’s studies on the Balassa-Samuelson Hypothesis in selected European countries
- Table 2. Review of studies on the Balassa-Samuelson Hypothesis in Romania
- Table 3. Testing for the Balassa-Samuelson Effect
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Trade openness and real effective exchange rate volatility: The case of Vietnam
Nguyen Thi Kim Lien ,
Thu-Trang Thi Doan ,
Toan Ngoc Bui
doi: http://dx.doi.org/10.21511/bbs.17(1).2022.13
Banks and Bank Systems Volume 17, 2022 Issue #1 pp. 150-160 Views: 665 Downloads: 580 TO CITE АНОТАЦІЯ2004–2020. The study was conducted in the context that Vietnam’s trade openness is increasing, causing significant challenges in macro management, including exchange rate management. The authors use vector autoregression model and Granger causality test to test this relationship. The study used a vector autoregression model and Granger causality test to investigate the causal relationship between trade openness and real effective exchange rate volatility in Vietnam over the period 2004–2020. The study was conducted in the context of Vietnam’s trade openness index rising, causing significant challenges in macro management, including exchange rate management. The study takes a new approach (i) using Vietnam’s real effective exchange rate relative to 143 trading partners; and (ii) examining the impact of economic growth on trade openness and exchange rate volatility. The research results indicate that trade openness has a two-way Granger causality with effective real exchange rate volatility in Vietnam at the 1% significance level. Specifically, the effect of trade openness on real exchange rate volatility is positive at a 1-period lag and 4-period lag. Meanwhile, real exchange rate fluctuations have a negative effect on trade openness with a 1-period lag. At the same time, the study also finds that increased economic growth reduces real effective exchange rate volatility and increases Vietnam’s trade openness. On that basis, the study proposes implications for the management of trade openness and exchange rate management in the current Vietnamese context.
