pp 1–24 | Cite as

Real exchange rate misalignments in CEECs: Have they hindered growth?

  • Juan Carlos Cuestas
  • Estefanía Mourelle
  • Paulo José RegisEmail author
Original Paper


We study the impact of exchange rate misalignment on economic activity in nine Central and Eastern European economies. Exchange rate misalignments are computed from country-specific long-run exchange rate relationships with determinants suggested by open macroeconomic models such as interest rate differentials or the Balassa–Samuelson effect. There was a clear reduction in misalignments, but this has been reversed to some extent after 2008. Exchange rate overvaluation has a negative impact on economic activity. The effect of misalignments on economic activity seems to be nonlinear, as overvaluation has a stronger effect than undervaluation. Other factors of economic activity, including institutions, also show nonlinear effects.


Real exchange rate misalignments Growth Central and Eastern European countries Panel smooth transition regression 

JEL Classification

O11 F41 F15 



Juan Carlos Cuestas acknowledges the financial support from the ECO2017-85503-R and ECO2017-83255-C3-3-P Projects from `Agencia Estatal de Investigación’ (AEI) Spain and `Fondo Europeo de Desarrollo Regional’ (FEDER). Comments from two anonymous referees are gratefully acknowledged. The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank, the European Central Bank or the Eurosystem.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Economics and Research DepartmentEesti PankTallinnEstonia
  2. 2.Department of Economics and FinanceTallinn University of TechnologyTallinnEstonia
  3. 3.Department of Economics and IEIJaume I UniversityCastellón de la PlanaSpain
  4. 4.Facultad de Ciencias Económicas y EmpresarialesUniversidade da CoruñaFerrolSpain
  5. 5.Division of EconomicsXi’an Jiaotong-Liverpool UniversitySuzhouChina

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