Implicit exchange regimes in Central and Eastern Europe: a first exploration |
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Authors: | Francisco Ledesma-Rodríguez Jorge Pérez-Rodríguez Simón Sosvilla-Rivero |
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Affiliation: | (1) Universidad de La Laguna, La Laguna, Tenerife, Spain;(2) Universidad de Las Palmas de Gran Canaria, Las Palmas de Gran Canaria, Spain;(3) Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa), Facultad de Ciencias Económicas y Empresariales, Universidad Complutense de Madrid, Campus de Somosaguas, 28223 Madrid, Spain |
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Abstract: | This paper attempts to identify implicit exchange rate regimes for currencies of the Central and Eastern European Countries vis-à-vis the euro. To that end, we apply a sequential procedure that considers the dynamics of exchange rates to data covering the period from 1977:01 to 2006:02. Our results would suggest that implicit bands have existed in many subperiods for almost all currencies under study. Once we detect de facto discrepancies between de facto and de iure exchange rate regimes, we propose a model in order to explain these decisions. Our results suggest a positive association between the previous inflation rate and the probability of a peg with the euro, and a negative association with past unemployment rate. |
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Keywords: | Exchange rate regimes Implicit fluctuation bands Exchange rates |
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