Transition Economy Convergence in a Two-Country Model: Implications for Monetary Integration
نویسنده
چکیده
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, i.e. he long-run trend real exchange rate appreciation, through investments in quality. Our exchange rate projections bear important policy implications, which we illustrate on the conflict between the inflation and nominal exchange rate criteria for the European Monetary Union in a set of selected transition economies in central and eastern Europe.
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