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Monetary Convergence And Risk Premiums In The EU Candidate Countries

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  • Lucjan T Orlowski

    (Sacred Heart University)

Abstract

This study examines the link between various monetary policy regimes and the ability to manage inflation and exchange rate risk premiums in the EU candidate countries as they undergo monetary convergence to the eurozone. The underlying hypothesis is that a system of 'flexible inflation targeting' may be an optimal policy choice for managing these two categories of risk. A model of inflation and exchange rate risk premiums within the context of inflation targeting is proposed. Recent trends in these risk premiums in Hungary, the Czech Republic and Poland are tested by using the GARCH(1,1) methodology.

Suggested Citation

  • Lucjan T Orlowski, 2005. "Monetary Convergence And Risk Premiums In The EU Candidate Countries," Macroeconomics 0501037, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0501037
    Note: Type of Document - pdf; pages: 36
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    References listed on IDEAS

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    14. Orlowski, Lucjan T., 2001. "From inflation targeting to the euro-peg: A model of monetary convergence for transition economies," Economic Systems, Elsevier, vol. 25(3), pages 233-251, September.
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    Cited by:

    1. Evžen Koèenda & Tigran Poghosyan, 2010. "Exchange Rate Risk in Central European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(1), pages 22-39, February.

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    More about this item

    Keywords

    inflation risk premium; exchange rate risk premium; inflation targeting; monetary convergence; transition economies;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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