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Options for the Payments and Exchange Rate System in Eastern Europe

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  • Bofinger, Peter

Abstract

The paper analyses the role of currency convertibility in the process of economic transition in Eastern Europe and discusses alternative institutional options for achieving this difficult task. It shows that an early transition to convertibility is an indispensable requirement for the success of real sector reforms but that this is only sustainable if the existing flow and stock disequilibria are removed. The options of flexible rates and an East European Payments Union seem less demanding in terms of internal financial stringency, but the former would lead to a high degree of exchange rate instability and the latter would only provide a very limited foreign impact on the domestic restructuring. The paper, therefore, focuses on fixed rate solutions (or adjustable pegs with a preannounced depreciation rate). It shows that the credibility of the exchange rate commitment and the degree of internal financial stringency, which are both crucial for the sustainability of convertibility and for a non-inflationary monetary framework in Eastern Europe, can be considerably increased if all monetary policy competencies are transferred to a supranational institution which is designed according to the blueprint for a European System of Central Banks.

Suggested Citation

  • Bofinger, Peter, 1991. "Options for the Payments and Exchange Rate System in Eastern Europe," CEPR Discussion Papers 545, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:545
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    Citations

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    Cited by:

    1. Schweickert, Rainer, 1995. "Currency reforms in the Former Soviet Union (FSU): on the importance of macroeconomic constraints," Kiel Working Papers 670, Kiel Institute for the World Economy (IfW Kiel).
    2. Heinemann, Friedrich, 1994. "Central Europe and European monetary integration: a strategy for catching up," ZEW Discussion Papers 94-21, ZEW - Leibniz Centre for European Economic Research.
    3. Schmieding, Holger, 1991. "Lending stability to Europe's emerging market economies: On the importance of the EC and the ECU for East-Central Europe," Kiel Working Papers 481, Kiel Institute for the World Economy (IfW Kiel).
    4. Schweickert, Rainer & Nunnenkamp, Peter & Hiemenz, Ulrich, 1992. "Stabilisierung durch feste Wechselkurse: Fehlschlag in Entwicklungsländern - Erfolgsrezept für Osteuropa?," Kiel Discussion Papers 181, Kiel Institute for the World Economy (IfW Kiel).
    5. Lucjan T. Orlowski, 1995. "Preparations of the Visegrad Group countries for admission to the European Union: monetary policy aspects," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(3), pages 333-353, September.
    6. Jean-Charles Asselain & François Bourguignon, 1994. "Convertibilité précoce et protection par le change : un premier bilan de la réinsertion internationale des pays de l'Est," Revue Économique, Programme National Persée, vol. 45(3), pages 833-844.
    7. Michael R. Emerson, 1991. "The transformation of trade and monetary regimes in Europe," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-76.
    8. Jan Svejnar, 2002. "Assistance to the Transition Economies : Were There Alternatives?," World Bank Publications - Books, The World Bank Group, number 20232, December.
    9. Chris Melliss & Mark Cornelius, 1994. "New currencies in the Former Soviet Union: a recipe for hyperinflation or the path to price stability," Bank of England working papers 26, Bank of England.
    10. Schweickert, Rainer, 1993. "Lessons from exchange rate based stabilization in Argentina," Kiel Working Papers 567, Kiel Institute for the World Economy (IfW Kiel).
    11. Schweickert, Rainer, 1994. "Regional integration: A worthwhile strategy for catching up?," Kiel Working Papers 623, Kiel Institute for the World Economy (IfW Kiel).
    12. Buch, Claudia M. & Koop, Michael J. & Schweickert, Rainer & Wolf, Hartmut, 1995. "Währungsreformen im Vergleich: monetäre Strategien in Rußland, Weißrußland, Estland und der Ukraine," Open Access Publications from Kiel Institute for the World Economy 831, Kiel Institute for the World Economy (IfW Kiel).
    13. Schweickert, Rainer, 1994. "Macroeconomic reforms in the Southern cone: lessons for developing and newly emerging market economies," Kiel Working Papers 614, Kiel Institute for the World Economy (IfW Kiel).
    14. Michel Aglietta & Michèle Bailly & Christian de Boissieu & Jean-Michel Charpin & Jean-Paul Dessertine & Etienne Lakits & Georges Mink & Jean-Pierre Page & Jacques Sapir & Jean Pisani-Ferry, 1992. "Repenser le soutien de la communauté internationale à l'Europe de l'Est," Revue de l'OFCE, Programme National Persée, vol. 42(1), pages 199-248.

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