Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226106
Authors: 
Holzner, Mario
Year of Publication: 
2006
Series/Report no.: 
wiiw Balkan Observatory Working Papers No. 068
Abstract: 
In this paper, first we investigate to which extent the real exchange rate is distorted in the 7 Southeast European countries (SEECs), and compare the findings with other countries in Europe. Second, we shed light into possible determinants and effects of the real exchange rate distortions. Finally, a policy change away from a possibly distorted real exchange rate in the SEECs is being simulated. The results indicate that especially the West Balkan countries have overvalued real exchange rates, while other transition countries' exchange rates are rather undervalued. Some of the main determinants of the real exchange rate distortion are related to the inflow of remittances and FDI, while it was found that nominal exchange rate depreciation and trade openness reduce the real exchange rate distortion. The simulation model shows that a devaluation can have large positive effects on domestic output, exports and trade with self.
Subjects: 
Real Exchange Rate
Partial Equilibrium Model
Simulation Model
International Trade
Southeast Europe
JEL: 
D58
E31
F17
F31
O24
Document Type: 
Working Paper

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