Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased?

Balázs Égert ()
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Balázs Égert: Oesterreichische Nationalbank
Authors registered in the RePEc Author Service: Maria Antoinette Silgoner and Jesus Crespo Cuaresma

Focus on European Economic Integration, 2004, issue 2, 138-181

Abstract: This paper investigates the equilibrium exchange rates of three Southeastern European countries, namely Bulgaria, Croatia and Romania, of two CIS economies, namely Russia and Ukraine, and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. The deviation from absolute purchasing power parity (PPP) and from the real exchange rate, which is given by relative productivity levels, is investigated. For Russia, a first look is taken at the Dutch disease phenomenon as a possible driving force behind equilibrium exchange rates. As a next step, a Behavioral Equilibrium Exchange Rate (BEER) model including productivity and net foreign assets is estimated using both time series and panel techniques. Control variables such as openness, public debt and public expenditures are also used to check for the robustness of the results. In a final stage, total real misalignment bands are computed for the countries under study.

Date: 2004
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