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SOURCES OF REAL EXCHANGE RATE FLUCTUATIONS IN NEW EU MEMBER STATES

100%
Mirdala R.
Ekonomický časopis (Journal of Economics)
|
2016
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vol. 64
|
issue 5
440 – 457
EN
Fixed versus flexible exchange rate dilemma has become a subject of rigorous academic discussions for decades. Advantages of exchange rates flexibility contrasted benefits of exchange rate stability though a phenomenon known as the fear of floating favoured exchange rate variability and its positive effects on economies. Relative diversity in the exchange rate regimes in EU-11 countries motivated authors to investigate the sources of their real exchange rate volatility. However, fixed exchange rate perspective associated with Euro Area membership may induce changed patterns in the real exchange rate determination in countries that benefit from nominal exchange rate flexibility prior to Euro adoption. In the paper we analyse sources of real exchange rates fluctuations in EU-11 countries by employing SVAR methodology and computation of impulse-response functions. Our results indicate an increased responsiveness of real exchange rates in Euro Area non-member states to demand and supply shocks, particularly due to the effects of the crisis period. At the same time, real exchange rates in Euro Area member states from EU-11 group became more responsive to nominal shocks.
2

ROLE OF EXCHANGE RATE ON THE ROAD TOWARDS THE EURO AREA: THE CASE OF BALTIC AND CENTRAL EMERGING EUROPEAN ECONOMIES

100%
Beker Pucar E., Glavaški O.
Ekonomický časopis (Journal of Economics)
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2020
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vol. 68
|
issue 3
289 – 317
EN
The paper deals with the attractiveness of the euro area for emerging EU members (Central Emerging European Economies vs Baltic States) from the angle of previously applied exchange rate regimes (floaters vs fixers). Monetary convergence is accompanied with real exchange rate appreciation, but the adjustment channels differ in dependence from adopted exchange rate framework. Impulse response functions from bivariate VAR models in the period 2000 – 2018/euro adoption are used to identify the impact of monetary and real shocks to real exchange rate variations, as well as real exchange rate transmission to economic activities. The results indicate: the prevalence of real shocks in initiating real exchange rate appreciation; higher real exchange rate sensitivity for the floaters with higher loss in terms of stabilization mechanism; less contractionary real exchange rate appreciation for the floaters with less output constraints due to the role of exchange rate as a shock absorber.
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