Sustainable Real Exchange Rates In The New EU Member States: What Did The Great Recession Change?

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The Great Recession affected export and import patterns in the sample countries, and these changes, coupled with a more volatile external environment, have profound impact on the estimates of real exchange rate misalignments and projections of sustainable real exchange rates. The authors find that real misalignments in several countries with pegged exchange rates and excessive external liabilities widened relative to earlier estimates. While countries with balanced net trade positions are expected to continue to experience appreciation during 2010- 2014, several currencies are likely to require real depreciation to maintain sustainable net external debt.