Fundamental equilibrium exchange rate for the Polish zloty

Rubaszek, Michal (2005): Fundamental equilibrium exchange rate for the Polish zloty.

Abstract

In May 2004 Poland joined the European Union and is thereby committed to introduce the euro in the forthcoming years. The balance of costs and benefits of the euro adoption depends on the decision of the Polish and European authorities concerning the level of central parity in the ERM II, and subsequently the conversion rate of the zloty. In order to address the issue of an "ideal" level of the real exchange rate this paper proposes a model which is applied to estimate the level of the equilibrium of the zloty. The results indicate that at the end of 2004 the zloty was undervalued by 4.3%.

• Item Type: MPRA Paper
• Language: English
• Keywords: conversion rate, equilibrium exchange rate, foreign trade model, cointegration
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation

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