| Abstrakt: |
Estimation and simulation of sustainable real exchange rates in four of the new EU member countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued in early 2005. Simulations, conditional on large-model macroeconomic projections, suggest that under current policies those currencies would be unlikely to stay within the ERM2 stability corridor during 2004-2010. In-sample simulations for Greece, Portugal, and Spain indicate a much smaller misalignment of national currencies prior to ERM2, but a gradual build up of real exchange rate misalignment, repetition of which could impose significant cost on the new, export dependent member countries. |
