This paper analyzes the relation between nominal exchange rate volatility and several macroeconomic variables, namely real per output growth, excess credit, foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member States. Using panel estimations for the period between 1995 and 2008, we find that lower exchange rate volatility is associated with higher growth, higher stocks of FDI, higher current account deficits, and higher excess credit. The results are economically and statistically significant, and robust.

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Décembre 2009 GATE Groupe d'Analyse et de Théorie Économique UMR 5824 du CNRS 93 chemin des Mouilles -69130 Écully -France B.P. 167 -69131 Écully Cedex Tél. +33 (0)4 72 86 60 60 -Fax +33 (0)4 72 86 60 90 Messagerie électronique gate@gate.cnrs.fr Serveur Web : www.gate.cnrs.fr Abstract This paper analyzes the relation between nominal exchange rate volatility and several macroeconomic variables, namely real per output growth, excess credit, foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member States. Using panel estimations for the period between 1995 and 2008, we find that lower exchange rate volatility is associated with higher growth, higher stocks of FDI, higher current account deficits, and higher excess credit. The results are economically and statistically significant, and robust. JEL: F3, F4, F5.

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