in Southeastern Europe in a Historical and Comparative Perspective

1. Introduction

Recently effective exchange rates for many core countries and some of the periphery have been subjected to detailed scientific research. Solomou and his collaborators did the painstaking job of data collection and developing a crosscountry as well as cross-time comparability of among the different regions of the Classical Gold Standard. In a seminal paper with Catāo (2000, p. 372) Solomou questioned the conventional wisdom of the fixed exchange rate regime, reflecting the predominance of an Anglo-American perspective. This research aims at the inclusion of yet another area of the ‘periphery’ that was generally so far omitted when the operation of the Gold Standard and the interwar gold-exchange standard were in review.

Our main purpose is to construct nominal and real effective exchange rates of the Bulgarian lev. The hope is that compiling long-term historical series will encourage further studies on Bulgarian quantitative economic history. Applying today’s widely accepted economic methodology will enable us to test the potential of adjustment mechanisms in the Europe’s Southeastern fringe. The current paper was inspired by the South-East Europe Monetary History Network (SEEMHN)

Data Collection Project. This would be a second such attempt in the SEE region after the work of Lazaretou (1995) on Greek nominal and real exchange rate development to the best of our knowledge.

The current paper is divided into 3 parts. The main body of research is presented in the second part, which additionally subdivided into three sections. In the first subsection we make a brief overview of the applied methodology. The second and the third subsections focus on two key from analytical point of view periods between 1897 and 1913 and 1927 and 1939. In the last part of the article we use standard econometric techniques to study some export’s determinants and particularly the impact of the Real Effective Exchange Rate (REER) and external demand on exports’ development. Such an analysis could provide us with interesting insights on whether and under what circumstances REER influenced export development. Moreover, the quantitative analysis would allow us to give some suggestions on the devaluation dilemma in the 1930’s. Detailed presentation of data and sources is presented in the Appendix.

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