Working Paper: CEPR ID: DP1366
Authors: Laszlo Halpern
Abstract: Five real exchange rate indicators are computed to assess the international competitiveness of Hungarian industry. These indicators are explained in econometric equations by employment, unemployment, productivity, interest spread and real producer wage. Causality tests reveal that external performance has an impact on real exchange rates and contributes to the explanation of real exchange rates. There is very limited scope for policy intervention to constrain the negative effects of capital inflow without incurring other costs.
Keywords: real exchange rate; exchange rate policy; Hungary
JEL Codes: F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| external performance indicators (P47) | real exchange rates (F31) |
| productivity (O49) | equilibrium real exchange rate (F31) |
| employment (J68) | equilibrium real exchange rate (F31) |
| unemployment (J64) | equilibrium real exchange rate (F31) |
| interest spread (E43) | equilibrium real exchange rate (F31) |
| capital inflows (F21) | real exchange rate appreciation (F31) |
| unrequited transfers (H87) | real exchange rates (F31) |
| international reserves (F31) | real exchange rates (F31) |