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Equilibrium Exchange Rates in EU New Members: Applicable for Setting the ERM II Central Parity?

Roman Horvath and Lubos Komarek ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we discuss the estimation and methodology of the real equilibrium exchange rate partial equilibrium models and analyze to what extent the resulting estimates are applicable for setting the central parity prior to ERM II entry in the new EU member states. Given the uncertainty surrounding the estimates, we argue that they are informative in the sign rather than the size of the misalignment of the exchange rate, but may still serve as useful consistency checks for the decision on the setting of the central parity. We argue that policy makers should consider the estimates in their decision-making only if the real exchange rate is substantially misaligned.

Keywords: Equilibrium Exchange Rate; ERM II; EU New Member States (search for similar items in EconPapers)
JEL-codes: C52 C53 E58 E61 F31 (search for similar items in EconPapers)
Date: 2006-10-20
New Economics Papers: this item is included in nep-eec, nep-ifn, nep-mac and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1180

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