The effect of nominal exchange rate volatility on real macroeconomic performance in the CEE countries |
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Authors: | Olga Arratibel Davide Furceri Reiner Martin Aleksandra Zdzienicka |
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Institution: | a European Central Bank, Directorate General Economics, Kaiserstraße 29, 60311 Frankfurt am Main, Germany;b University of Palermo, Department of Economics, Italy;c OECD, Macroeconomic Analysis Division, 2 rue André-Pascal, 75775 Paris Cedex 16, France;d CEPII, 9 rue Georges Pitard, 75740 Paris, Cedex 15, France |
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Abstract: | This paper analyzes the relation between nominal exchange rate volatility and several macroeconomic variables, namely real 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. At the same time, the recent evidence seems to suggest that following the global financial crisis, “hard peg” countries may have experienced a more severe adjustment process than “floaters”. The results are economically and statistically significant and robust. |
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Keywords: | EU Exchange rate volatility Growth FDI Credit Current account |
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