Chapter

The transition economies: A NATREX evaluation of research<sup>1</sup>

Jerome L. Stein

in Stochastic Optimal Control, International Finance, and Debt Crises

Published in print April 2006 | ISBN: 9780199280575
Published online May 2006 | e-ISBN: 9780191603501 | DOI: http://dx.doi.org/10.1093/0199280576.003.0006
 							The transition economies: A NATREX evaluation of research1

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On the basis of the NATREX model, several key studies are evaluated to answer the questions: How can the trends in the real exchange rates of the transition economies of Eastern Europe be explained? What are sustainable and equilibrium real exchange rates, current account deficits, and net investment positions in the medium and in the long-run? What are the policy implications for the transition economies planning to join the Euro area? Neither the PPP nor the Balassa-Samuelson hypotheses can explain the data. Both the reduced form and structural equations of the NATREX model are consistent with the data for Hungary and the Czech Republic. The exchange rate behavior for Poland and Bulgaria also are explained by the NATREX model.

Keywords: Central Europe; Eastern Europe; real exchange rates; current account deficits; purchasing power parity; Balassa-Samuelson effect; NATREX model; populist scenario; growth scenario; Bundesbank

Chapter.  13294 words.  Illustrated.

Subjects: Financial Markets

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