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Transition economy convergence in a two-country model: implications for monetary integration

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  • Brůha, Jan
  • Podpiera, Jiří

Abstract

In this paper we present a two-country dynamic general equilibrium model of ex ante unequally developed countries. The model explains a key feature recently observed in transition economies - the long-run trend real exchange rate appreciation - through investments into quality. Our exchange-rate projections bear important policy implications, which we illustrate on the collision between the price and nominal exchange rate criterion for the European Monetary Union in a set of selected transition economies in Central and Eastern Europe. JEL Classification: E58, F15, F43

Suggested Citation

  • Brůha, Jan & Podpiera, Jiří, 2007. "Transition economy convergence in a two-country model: implications for monetary integration," Working Paper Series 740, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2007740
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Balázs Égert, 2012. "Dutch diease in the post-soviet countries of central and south-west Asia: How contagious is it?," Post-Print hal-01385841, HAL.
    2. repec:wsr:wpaper:y:2008:i:018 is not listed on IDEAS
    3. Jan Bruha & Jiri Podpiera & Stanislav Polak, 2007. "The Convergence of a Transition Economy: The Case of the Czech Republic," Working Papers 2007/3, Czech National Bank.
    4. Balázs Égert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," Working Papers 138, Oesterreichische Nationalbank (Austrian Central Bank).
    5. Bruha, Jan & Podpiera, Jirí & Polák, Stanislav, 2010. "The convergence dynamics of a transition economy: The case of the Czech Republic," Economic Modelling, Elsevier, vol. 27(1), pages 116-124, January.
    6. Égert, Balázs, 2009. "Dutch disease in former Soviet Union: witch-hunting?," BOFIT Discussion Papers 4/2009, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. repec:cnb:ocpubv:as17 is not listed on IDEAS
    8. Bogoev, Jane & Bojceva Terzijan, Sultanija & Égert, Balázs & Petrovska, Magdalena, 2008. "Real Exchange Rate Dynamics in Macedonia: Old Wisdoms and New Insights," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-19.
    9. repec:cnb:ocpubv:as08 is not listed on IDEAS
    10. repec:cnb:ocpubv:as22 is not listed on IDEAS
    11. repec:cnb:ocpubv:as16 is not listed on IDEAS
    12. repec:zbw:bofitp:2009_004 is not listed on IDEAS
    13. International Monetary Fund, 2007. "Euro Area Policies: Selected Issues," IMF Staff Country Reports 2007/259, International Monetary Fund.
    14. repec:cnb:ocpubv:as15 is not listed on IDEAS
    15. repec:cnb:ocpubv:as23 is not listed on IDEAS
    16. Balázs Égert, 2009. "Dutch Disease in Former Soviet Union: Witch-Hunting," CASE Network Studies and Analyses 0380, CASE-Center for Social and Economic Research.

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    More about this item

    Keywords

    convergence; Currency area; monetary policy; Two-country modeling;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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