Amina Lahrèche-Révil

The Euro as a Monetary Anchor in the CEECs

We study whether Central and Eastern European Countries (CEECs) have an incentive to use the euro as a monetary anchor. Adapting a cross-section estimation method initiated by Bayoumi and Eichengreen, we show that, compared to an optimum currency area standard, the CEECs have paid too much attention to the USD in the past and should prefer the euro to the dollar as a nominal anchor. Through a theoretical model that takes external constraints into account, we then show that the CEECs should also have an incentive to stabilize their currencies in real terms against a basket where the euro would be prominent.

Estimating the Equilibrium Exchange Rate of the Central and Eastern European Acceding Countries: The Challenge of Euro Adoption

This study estimates the equilibrium real and nominal exchange rates for five Central and Eastern European (CEE) countries. A new approach is adopted, which combines the fundamental equilibrium exchange rate (FEER) with the behavioural equilibrium exchange rate (BEER) methodology. In a VAR-based 3-equation cointegration system, we estimate structural equations for internal and external balances and link them to the real exchange rate. The estimated misalignment is used to derive equilibrium nominal exchange rates. The sustainability of an ERM-II-type exchange rate regime is investigated on ex post data, and the credibility problem of fixing the currencies of CEE countries vis-a-vis the single European currency is analysed. JEL no. E31, F31, O11, P17This study estimates the equilibrium real and nominal exchange rates for five Central and Eastern European (CEE) countries. A new approach is adopted, which combines the fundamental equilibrium exchange rate (FEER) with the behavioural equilibrium exchange rate (BEER) methodology. In a VAR-based 3-equation cointegration system, we estimate structural equations for internal and external balances and link them to the real exchange rate. The estimated misalignment is used to derive equilibrium nominal exchange rates. The sustainability of an ERM-II-type exchange rate regime is investigated on ex post data, and the credibility problem of fixing the currencies of CEE countries vis-à-vis the single European currency is analysed. JEL no. E31, F31, O11, P17