Working Paper: CEPR ID: DP4869
Authors: Balzs Gert; Lszl Halpern
Abstract: This Paper sets out to analyse the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis. We study the extent to which the estimated real misalignments reported in the literature depend on the underlying theoretical approach (Balassa-Samuelson effect, Behavioural Equilibrium Exchange Rate, Fundamental Equilibrium Exchange Rate) and on other characteristics of the individual studies. We also seek to explore whether we can gain more insight from the literature regarding what determines the size and, perhaps more importantly, the sign of the estimated coefficient of the productivity variable and of two other variables commonly included in real exchange rate determination equations, notably net foreign assets and openness.
Keywords: Balassa-Samuelson effect; equilibrium exchange rate; meta analysis
JEL Codes: C15; E31; F31; O11; P17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Theoretical background (C91) | Size of estimated real misalignments (C51) |
| Balassa-Samuelson effect (F16) | Size of estimated real misalignments (C51) |
| Fundamental equilibrium approach (D53) | Size of estimated real misalignments (C51) |
| Behavioral equilibrium approach (C62) | Size of estimated real misalignments (C51) |
| Data type (C89) | Misalignment estimates (C51) |
| Time series data (C22) | Misalignment estimates (C51) |
| Cross-sectional data (Y10) | Misalignment estimates (C51) |
| Classification of sectors as tradable or non-tradable (F19) | Productivity variable's coefficient (E23) |