Estimation and simulation of sustainable real exchange rates in some of the new EU accession countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued...

The analysis is structured around the standard taxonomy of transmission channels. A monetary tightening must limit banks' ability to supply loans by reducing bank reserves/bank credit. The direct interest rate channel is the strongest channel of the monetary policy transmission mechanism (MPTM),...

This Selected Issues paper analyzes trends in Tanzania’s external competitiveness and export performance. Using various multilateral and bilateral real exchange rates, the paper looks at developments in Tanzania’s real effective exchange rate since 1990. It evaluates the...

Burundi has made much progress since the signing of the Arusha peace and reconciliation agreement. The handling of the economy has been highly competent considering the inordinate difficulties faced by Burundi in recent years. The bank of the Republic of Burundi has made progress in the...

The paper looks at the hypothesis that financial market liberalization can create a basis for more stable exchange rates, as deviations of exchange rates from equilibrium levels bring forth stabilizing flows of liquidity. This "endogenous liquidity" hypothesis suggests that opening financial...

Consensus estimates put the half-life of deviations from purchasing power parity (PPP) at about four years (Rogoff, 1996). However, conventional least squares estimates of half-lives are biased downward. Accordingly, as a preferred measure of the persistence of real exchange rate shocks, this...

China’s transformation into a dynamic private-sector-led economy and its integration into the world economy have been among the most dramatic global economic developments of recent decades. This paper provides an overview of some of the key aspects of recent developments in China’s...

This 2002 Article IV Consultation highlights that in 2001, the South African economy felt the impact of a slowdown in global economic activity, which interrupted the modest upturn that started late in 1998. Driven mainly by a contraction in overseas demand that lowered export prices and volumes,...

The Libyan economy remains saddled with extensive controls, restrictions, and subsidies that continue to distort prices and resource allocations, hinder efficiency and competitiveness, and impede the performance of the economy. Executive Directors commended the liberalizing of the economy, and...

Quantifying the size and speed of the exchange rate pass-through to prices is important for formulating monetary policy decisions in Romania. Using a recursive VAR model, this paper finds that (i) the pass-through is large and relatively fast, accounting for a sizable fraction of inflation; (ii)...