DP1366 | Real Exchange Rates and Exchange Rate Policy in Hungary

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15/03/1996

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Abstract

Five real exchange rate indicators are computed to assess the international competitiveness of Hungarian industry. These indicators are explained in econometric equations by employment, unemployment, productivity, interest spread and real producer wage. Causality tests reveal that external performance has an impact on real exchange rates and contributes to the explanation of real exchange rates. There is very limited scope for policy intervention to constrain the negative effects of capital inflow without incurring other costs.