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Stability of monetary unions : lessons from the break-up of Czechoslovakia Author info | Abstract | Publisher info | Download info | Related research | Statistics Fidrmuc, J.
Horvath, J. (Tilburg University, Center for Economic Research)
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In 1993, Czechoslovakia experienced a two-fold break-up: On January 1 st, the country disintegrated as a political union, while preserving an economic and monetary union. Then, the Czech-Slovak monetary union collapsed on February 8 th. We analyze the economic background of the two break-ups, and discuss lessons for stability of monetary unions in general. We argue that while Czechoslovakia could be considered an optimum currency area, it was in fact less integrated than some other existing unions. That, along with low labor mobility and higher concentration of heavy and military industries in Slovakia, made Czechoslovak economy vulnerable to asymmetric economic shocks - such as those induced by the economic transition. Furthermore, the Czech-Slovak monetary union was marred by low credibility, lack of political commitment, low exit costs, and the absence of fiscal transfers.
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
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Find related papers by JEL classification: F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
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