Real Effective Exchange Rates and deindustrialization: Evidence from 25 Post-Communist Eastern European countries

Čizmović, Mirjana; Shachmurove, Yochanan; Vulanović, Miloš

doi:10.1080/14631377.2020.1867429

Cited by 8 publications

(5 citation statements)

References 109 publications

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“…However, the expansionary effect of depreciation on output is observed for Poland (Bahmani-Oskooee & Kutan, 2008;Haug, Jędrzejowicz, & Sznajderska, 2013). Recently, an expansionary effects of currency depreciation on industrial production has been obtained for 25 Eastern European countries (Cizmović, Shachmurove, & Vulanovic, 2021). As control variables, the trade openness and several indexes of institutional quality had been used.…”

Section: Exchange Rate and Outputmentioning

confidence: 99%

“…Exchange rate output effects are less clear. Earlier studies for the CEE countries are mostly in favour of contractionary exchange rate depreciations (Bahmani-Oskooee & Miteza, 2006;Bahmani-Oskooee & Kutan, 2008;Miteza, 2006), but recent studies incline towards a more favourable treatment of a weaker currency (Cuestas, Monfort, & Ordóñez, 2019;Cizmović, Shachmurove, & Vulanovic, 2021). In turn, it strengthens an argument in favour of a floating exchange rate regime (Dabrowski & Wroblewska, 2020;Ihnatov & Capraru, 2012).…”

Section: Introductionmentioning

confidence: 95%

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Price and output effects of long-term exchange rate changes: Central and Eastern European countries in 2002-2019

Shevchuk¹

2022

EBER

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The objective of the article is to measure the magnitude of the long-term exchange rate price and output effects in the Central and Eastern European countries (plus Turkey and Russia) which practice flexible exchange rate policies, while controlling for the institutional quality and policy stance as measured by the Index of Economic Freedom (IEF) from the Heritage Foundation database. Research Design & Methods:To analyse long-term price and output effects, the anticipated value of a nominal effective exchange rate was used as obtained by the ARIMA (n,m) model. We analysed the relationships between selected macroeconomic variables with the panel DOLS model using quarterly data from 2002 to 2019. Individual country estimates were provided as well. The study considered alternative specifications for regression models, with control for the money supply and institutional developments. Findings: Our study revealed that anticipated depreciation of the exchange rate was associated with the incomplete exchange rate pass-through (ERPT) into consumer prices and a decrease in output, with the former becoming stronger over the low-inflationary 2010-2019 period. Among other results, there was a trade-off between price and output effects of the money supply. As expected, investments in physical capital were the factor behind higher output. Finally, liberalisation efforts as proxied with the IEF were inflationary and contractionary. Implications & Recommendations: It was demonstrated that policies aimed at gradual strengthening of local currencies could be helpful for both acceleration of output growth and containment of inflation in the long run. At the same time, it is not recommended to proceed with further liberalisation of regulatory environment, as it seems not to bring about any favourable output effects while contributing to higher consumer prices. Contribution & Value Added:The novelty of this study is the estimation of the long-term price and output effects of the anticipated exchange rate while controlling for institutional quality and the progress of market reforms as measured by the IEF. The findings may serve as suggestions for reliable exchange rate policy, with a focus on predictability and the long-term macroeconomic effects.

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Section: Exchange Rate and Outputmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 95%

Price and output effects of long-term exchange rate changes: Central and Eastern European countries in 2002-2019

Shevchuk¹

2022

EBER

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“…Since then, the development of RERs in most countries was more of stagnation than appreciation; nevertheless, it did not allow to forestall a wave of devaluations swelling across the whole former Soviet Union in 2014-2016 4 (Dabrowski 2016;Vinokurov et al 2017). But, unlike the previous currency crisis episodes, it brought important change to almost all of the region's nations: the liberalization of exchange rate regimes and higher degree of control over inflation (Cizmovic et al 2021). Such actions added some durability to the FSU countries' exchange rates and enabled them to evade painful currency crunches in the wake of the recent events linked to the coronavirus crisisthe depreciation of nominal rates did not exceed the magnitude observed in other developing nations, while the RERs continued to remain relatively stable.…”

Section: Real Exchange Rates and Currency Crisesmentioning

confidence: 99%

“…The in-detail description of the mentioned unit root tests is provided byHurlin and Mignon (2007). For the implementation of the second-generation unit root tests in the alike economic environment, see, for example,Cizmovic et al (2021).…”

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confidence: 99%

Real Exchange Rate Misalignments and Currency Crises in the Former Soviet Union Countries

Dudzich

2021

Comp Econ Stud

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The paper explores the utility of real exchange rate misalignments from their equilibrium for identification of currency crises in the former Soviet Union countries. We estimate equilibrium exchange rates for 10 former Soviet Republics employing behavioural equilibrium exchange rate (BEER) and natural real exchange rate (NATREX) concepts and pooled mean group estimator. Subsequently, we compare the estimated misalignments before, during and after the currency crisis episodes and regress the misalignments on crisis-related variables. The results indicate that the misalignments tended to increase before the crises and visibly reduced after, thus serving as potentially viable predictors of such events.

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“…However, it is not without obstacles. As exchange rate depreciation is expansionary in the Eastern European countries, according to, for example, Haug, Jędrzejowicz and Sznajderska [2013], Jevdović [2014], Cizmović, Shachmurove and Vulanovic [2021], estimates for Ukraine are mostly of the inverse relation between the weak currency and output. Contractionary effect of nominal (real) exchange rate depreciation is obtained in different modelling settings by Shevchuk [2016], Kopych [2017], andShevchuk [2019].…”

Section: Literature Reviewmentioning

confidence: 99%

Run Effects of the Short-Run Stabilization Policies in Ukraine

Poliakova

Cокуренко

2023

QME

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Based on of the quarterly data for the period of 2002-2021 and with the application of ARDL estimates it has been established that in the case of recession there are short-run expansionary effects of government expenditures and exchange rate appreciation. However, government expenditures become contractionary in the long run, along with monetary policy tightening. Liberalisation of economic environment, as indicated by the Index of Economic Freedom from the Heritage Foundation, is expansionary in the long run. Finally, about 80% of deviation from the long-run relationship is corrected in the short run. Key words: stabilization policy, fiscal-monetary mix, exchange rate, Ukraine, error-correction model (ARDL)

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Real Effective Exchange Rates and deindustrialization: Evidence from 25 Post-Communist Eastern European countries

Cited by 8 publications

References 109 publications

Price and output effects of long-term exchange rate changes: Central and Eastern European countries in 2002-2019

Price and output effects of long-term exchange rate changes: Central and Eastern European countries in 2002-2019

Real Exchange Rate Misalignments and Currency Crises in the Former Soviet Union Countries

Run Effects of the Short-Run Stabilization Policies in Ukraine

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