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CNB > Economic research > Research publications > CNB Working paper series > 2003 > Some Exchange Rates Are More Stable than Others; Short-Run Evidence from Transition Countries

Some Exchange Rates Are More Stable than Others; Short-Run Evidence from Transition Countries

Aleš Bulíř

The paper investigates empirically the endogenous liquidity nexus of exchange rate determination on a sample of four transition economies. We find evidence in favor of the hypothesis of a nonlinear error correction process vis-a-vis longer-term trend deviations. The results suggest that early and successful exchange-rate market and financial-account liberalization pays off in terms of depth of the market and, hence, faster adjustment of national currencies to short-term shocks to the exchange rate.

Issued: July 2003

Keywords: Exchange rate, endogenous liquidity, error-correction mechanism, nonlinearity

Revised version:

Download  CNB WP No 5/2003 (pdf, 675 kB)