Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153174 
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper No. 740
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
In this paper we present a two-country dynamic general equilibrium model of ex ante unequally developed countries. The model explains a key feature recently observed in transition economies – the long-run trend real exchange rate appreciation – through investments into quality. Our exchange-rate projections bear important policy implications, which we illustrate on the collision between the price and nominal exchange rate criterion for the European Monetary Union in a set of selected transition economies in Central and Eastern Europe.
Subjects: 
convergence
Currency area
monetary policy
Two-country modeling
JEL: 
E58
F15
F43
Document Type: 
Working Paper

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