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Long‐run determinants and misalignments of the real effective exchange rate in the EU
Author(s) -
Comunale Mariarosaria
Publication year - 2019
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/sjpe.12206
Subject(s) - economics , core (optical fiber) , exchange rate , econometrics , transfer (computing) , short run , panel data , monetary economics , computer science , telecommunications , parallel computing
This paper explores the role of fundamentals, included in the transfer effect theory, in explaining medium/long‐run movements in the real effective exchange rates in the EU over the period 1994–2012, together with an analysis of the misalignments. We use heterogeneous, cointegrated panel frameworks in static and a dynamic setup. We find that the coefficients of the determinants are extremely different across groups and the transfer theory does not always hold. The core countries have been undervalued for almost the whole period; the periphery has experienced high rates. The misalignments in the CEEC s are still wide and reflect the catching‐up process.