Competitiveness in Bulgaria: An Assessment of the Real Effective Exchange Rate

March 1, 2004

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 presents an empirical analysis of the medium- and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate that the RER is driven by fundamentals, including labor productivity, terms of trade, world real interest rates, gross savings, and foreign direct investment. The model also shows that there is no significant misalignment of the Bulgarian lev.

Subject: Balance of payments, Foreign direct investment, Foreign exchange, International trade, Production, Productivity, Real effective exchange rates, Real exchange rates, Terms of trade

Keywords: BEER, Bulgaria, Bulgarian lev, Competitiveness, exchange rate, Foreign direct investment, Fundamental determinants, NATREX, overvalued exchange RER, Productivity, productivity data, productivity development, productivity differential, Real effective exchange rates, Real exchange rates, RER., saving, Terms of trade, terms of trade index, WP

Pages:
25
Volume:
2004
DOI:
https://doi.org/10.5089/9781451845600.001
Issue:
037
Series:
Working Paper No. 2004/037
Stock No:
WPIEA0372004
ISBN:
9781451845600
ISSN:
1018-5941

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