Emmanuel Haven, Ph.D., School of Management, University of Leicester, University Road, Ken Edwards Building, Leicester, LE1 7RH, United Kingdom and Elena Pelinescu, Ph.D., Institute for Economic Forecasting - Romanian Academy, Casa Academiei, Calea 13 Septembrie nr.13, sector 5, Bucharest, 050711, Romania.
In the context of the current financial crisis, we are examining the role of the currency exchange channel in the transmission of the impact of the international crisis to the Romanian economy. We keeping in mind that the Romanian economy is a open economy: i) almost 80% of total exports are with European Union countries; ii) the exchange rate regime is a managing floating regime, and iii) the current account is fully convertible. We use a SVAR model to make evident the currency exchange rate channel. We use as variables: i) the modification in real time of the gross domestic product; ii) the interest rate index for a 3-month term on the money market in Romania; iii) the quarterly modification of the leu/EUR exchange rate, and iv) the net exports increase index. All variables have been de-seasonalized. The data used provides from the Eurostat database and the data frequency is quarterly. The reporting period is Q1: 2000, Q3: 2008. We conclude from our study that a shock in the nominal exchange rate leads to a drop in the money demand in the first two periods and an increase in the real interest rate. The variation of the actual currency exchange rate is explained in a major proportion (over 37% during the first two quarters) by its own variation, with a decreasing tendency maintained at a level exceeding 34 % even after five periods, the remaining being explained, in order of importance, by the variations of the net gross domestic product (between 26-31%, except for the first period) and by the variation of the net exports of goods and services (between 33-24%), and by the variation of the actual rate of the monetary market interest for three months (between 8-11%).
Key words: transmission mechanism, financial crisis, and exchange rate, SVAR
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