Maintaining Competitiveness Under Equilibrium Real Appreciation: The Case of Slovakia

Author/Editor:

Nienke Oomes

Publication Date:

March 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper evaluates competitiveness in Slovakia and estimates the equilibrium real exchange rate for the koruna. Slovak wages and prices are found to have been relatively low even when adjusted for differences in relative income and productivity, suggesting an undervalued real exchange rate. However, recent rapid nominal appreciation has reduced most or all of this undervaluation and has brought the real exchange rate near or above equilibrium. The productivity-driven equilibrium real appreciation rate during 2005?09 is estimated at close to 3 percent per year but can be lower with the help of fiscal consolidation.

Series:

Working Paper No. 2005/065

Subject:

Government consumption Price controls Productivity Real exchange rates Wages

English

Publication Date:

March 1, 2005

ISBN/ISSN:

9781451860849/1018-5941

Stock No:

WPIEA2005065

Pages:

29

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