The EU real exchange rates: Asymmetries and crises
In this paper we contribute to the long literature on determining the real exchange rate by using models that incorporate structural breaks and nonlinearities. We estimate cointegrated dynamic ordinary least squares regressions, Bayesian vector autoregressions (VAR), and interactive panel VARs. We find that the estimated coefficients for the CEECs and for the other member states differ from each other. We also find that the models are different before and after the crisis, and appreciations and depreciations of the RER seem to condition the long run equations for the EU15+2.