7/2019 Juan Carlos Cuestas. On the evolution of competitiveness in Central and Eastern Europe: is it broken?

Working Papers of Eesti Pank 7/2019

In this paper we aim to analyse the evolution of the real exchange rate (RER) as a measure of competitiveness for a group of Central and Eastern European countries. To do so, we apply unit root tests with breaks and estimate equations with structural breaks. The results show that even though RERs have become flatter, which means less competitiveness is lost against main trading partners,
they have become less mean reverting, meaning that shocks now tend to have longer effects. Policy conclusions are derived from this analysis.

JEL Codes: C22, F15

Keywords: real exchange rates, Central and Eastern Europe, structural breaks, European integration

DOI: 10.23656/25045520/072019/0169

Author’s email: cuestas [at] uji.es

The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank or the Eurosystem.