Real Exchange Rates Behavior in Selected EU Member States: Assessment of the Financial Crisis Effect.

The real exchange rate is one of the crucial macroeconomic variables for all open economies. Therefore, analysis of its evolution as well as volatility and behavior of its components (nominal exchange rate and relative prices) is of critical importance for both the economic theory and economic policy. In this paper, we focus on the interaction among the component variables of the real exchange rate. The main objective of this paper is evaluate how the relative prices affect the exchange rate. We calculate volatility measure and apply the Granger causality test, variance decomposition and impulse-response function in the Vector Auto Regression model for six selected non-euro EU member states (Czechia, Hungary, Poland, Denmark, Sweden and the United Kingdom). The calculations are conducted for two periods distinguished as the pre-crisis period and the post-crisis period. The results differ substantially between the periods and provide evidence that the relative prices play more important role in explaining the exchange rate behavior in the post-crisis period than before its origin. [ABSTRACT FROM AUTHOR]