{
  "title": "Maintaining Competitiveness Under Equilibrium Real Appreciation: The Case of Slovakia",
  "publication": "IMF Working Papers, March 1, 2005",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/maintaining-competitiveness-under-equilibrium-real-appreciation-the-case-of-slovakia-18092",
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  "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.",
  "sections": [
    {
      "heading": "Summary and central conclusion",
      "content": "- The paper evaluates competitiveness in Slovakia and estimates the equilibrium real exchange rate for the koruna.\n- Slovak wages and prices were found to have been relatively low even when adjusted for differences in relative income and productivity, indicating an undervalued real exchange rate.\n- Recent rapid nominal appreciation has reduced most or all of this undervaluation and has brought the real exchange rate near or above equilibrium.\n- 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."
    },
    {
      "heading": "Key findings",
      "content": "- Wages and prices in Slovakia: relatively low after adjustments for relative income and productivity → suggests an undervalued real exchange rate.\n- Nominal appreciation: recent rapid nominal appreciation has largely eliminated the previously observed undervaluation.\n- Equilibrium assessment: current real exchange rate is near or above estimated equilibrium."
    },
    {
      "heading": "Quantitative estimate and projection",
      "content": "- Productivity-driven equilibrium real appreciation rate during 2005?09: estimated at close to 3 percent per year.\n- Fiscal policy interaction: this equilibrium appreciation rate can be lower with the help of fiscal consolidation."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Monitor real exchange rate developments as rapid nominal appreciation can quickly erode previously observed undervaluation.\n- Consider fiscal consolidation as a policy tool to reduce the required equilibrium real appreciation rate driven by productivity.\n- Maintain policies that preserve competitiveness as the real exchange rate approaches or exceeds equilibrium.\n\nMaintaining Competitiveness Under Equilibrium Real Appreciation: The Case of Slovakia, Nienke Oomes, March 1, 2005.\n\n---\n\n Content in this bundle\n\n- wp0565\n  - wp0565 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp0565 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/maintaining-competitiveness-under-equilibrium-real-appreciation-the-case-of-slovakia-18092"
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    "Authors: Nienke Oomes",
    "Published: March 1, 2005",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451860849.001",
    "The paper evaluates competitiveness in Slovakia and estimates the equilibrium real exchange rate for the koruna.",
    "Slovak wages and prices were found to have been relatively low even when adjusted for differences in relative income and productivity, indicating an undervalued real exchange rate.",
    "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.",
    "Wages and prices in Slovakia: relatively low after adjustments for relative income and productivity → suggests an undervalued real exchange rate.",
    "Nominal appreciation: recent rapid nominal appreciation has largely eliminated the previously observed undervaluation.",
    "Equilibrium assessment: current real exchange rate is near or above estimated equilibrium.",
    "Productivity-driven equilibrium real appreciation rate during 2005?09: estimated at close to 3 percent per year.",
    "Fiscal policy interaction: this equilibrium appreciation rate can be lower with the help of fiscal consolidation.",
    "Monitor real exchange rate developments as rapid nominal appreciation can quickly erode previously observed undervaluation.",
    "Consider fiscal consolidation as a policy tool to reduce the required equilibrium real appreciation rate driven by productivity.",
    "Maintain policies that preserve competitiveness as the real exchange rate approaches or exceeds equilibrium.",
    "**_wp0565**"
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