Impact of Currency Boards on Fiscal Policy in Central and Eastern European Countries
The paper focuses on the impact of currency boards on fiscal policy in transition economies. Starting with an overview of theoretical and empirical studies in the related area, it tests for the interaction between monetary policy regimes and fiscal policy in Central and Eastern European countries who aim for the membership in the European Union. The theoretical background of this study lies in the model of Tornell and Velasco (1998). They demonstrate that fiscal transfers do not ultimately depend on the chosen exchange rate and monetary policy, but only on the world's real rate of interest and the rate of time preference of the fiscal authority. A sample of 10 accession candidates constitutes a group of countries which go through similar macroeconomic stabilisation processes but have chosen different nominal anchors. The paper investigates whether there are any systematic differences between those countries with a currency board arrangement and those without. The empirical evidence suggests that currency boards enhance fiscal discipline in Central and Eastern European countries. Copyright Kluwer Academic Publishers 2003
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aaron Tornell & Andres Velasco, 1995.
"Money-Based versus Exchange Rate-Based Stabilization with Endogenous Fiscal Policy,"
NBER Working Papers
5300, National Bureau of Economic Research, Inc.
- Tornell, Aaron & Velasco, Andres, 1995. "Money-Based Versus Exchange Rate-Based Stabilization with Endogenous Fiscal Policy," Working Papers 95-21, C.V. Starr Center for Applied Economics, New York University.
- Nenovsky Nikolay & Hristov Kalin & Mihaylov Mihail, 2001.
"Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania,"
Journal des Economistes et des Etudes Humaines,
De Gruyter, vol. 11(4), pages 1-44, December.
- K. Hristov & M. Mihaylov & Nikolay Nenovsky, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Post-Print halshs-00259886, HAL.
- Nikolay Nenovsky, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Post-Print halshs-00260066, HAL.
- K. Hristov & M. Mihaylov & Nikolay Nenovsky, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Post-Print halshs-00259892, HAL.
- Halpern, László & Neményi, Judit, 2002. "Fiscal Foundation of Convergence to European Union in Pre-Accession Transition Countries," Discussion Paper Series 1: Economic Studies 2002,03, Deutsche Bundesbank, Research Centre.
- Francesco Giavazzi & Marco Pagano, 1991.
"The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility,"
in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 303-330
National Bureau of Economic Research, Inc.
- Giavazzi, Francesco & Pagano, Marco, 1988. "The advantage of tying one's hands : EMS discipline and Central Bank credibility," European Economic Review, Elsevier, vol. 32(5), pages 1055-1075, June.
- Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers.
- Tornell, Aaron & Velasco, Andres, 1995.
"Fixed Versus Flexible Exchange Rates: Which Provides More Fiscal Discipline,"
95-06, C.V. Starr Center for Applied Economics, New York University.
- Tornell, Aaron & Velasco, Andres, 2000. "Fixed versus flexible exchange rates: Which provides more fiscal discipline?," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 399-436, April.
- Aaron Tornell & Andres Velasco, 1995. "Fixed versus Flexible Exchange Rates: Which Provides More Fiscal Discipline?," NBER Working Papers 5108, National Bureau of Economic Research, Inc.
- Fatás, Antonio & Rose, Andrew K, 2001. "Do Monetary Handcuffs Restrain Leviathan? Fiscal Policy in Extreme Exchange Rate Regimes," CEPR Discussion Papers 2692, C.E.P.R. Discussion Papers.
- Chetan Ghate & Paul J. Zak, .
"Growth of Government And The Politics of Fiscal Policy,"
Claremont Colleges Working Papers
2000-19, Claremont Colleges.
- Ghate, Chetan & Zak, Paul J., 2002. "Growth of government and the politics of fiscal policy," Structural Change and Economic Dynamics, Elsevier, vol. 13(4), pages 435-455, December.
- Marie-Thérèse Camilleri Gilson, 2002. "Policy Pre-Commitment and Institutional Design: A Synthetic Indicator Applied to Currency Boards," OECD Economics Department Working Papers 330, OECD Publishing.
- Anne Marie Gulde, 1999. "The Role of the Currency Board in Bulgaria's Stabilization," IMF Policy Discussion Papers 99/3, International Monetary Fund.
- Paul R. Masson & Morris Goldstein & Jacob A. Frenkel, 1991. "Characteristics of a Successful Exchange Rate System," IMF Occasional Papers 82, International Monetary Fund.
- A. Javier Hamann, 1999.
"Exchange-Rate-Based Stabilization; A Critical Look at the Stylized Facts,"
IMF Working Papers
99/132, International Monetary Fund.
- By A. Javier Hamann, 2001. "Exchange-Rate-Based Stabilization: A Critical Look at the Stylized Facts," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 4.
- Lucjan T Orlowski, 2005.
"A Dynamic Approach to Inflation Targeting in Transition Economies,"
- Orlowski, Lucjan T., 2000. "A dynamic approach to inflation targeting in transition economies," ZEI Working Papers B 11-2000, University of Bonn, ZEI - Center for European Integration Studies.
- Enrique Alberola & Luis Molina, 2000. "Fiscal Discipline and Exchange Rate Regimes: a Case for Currency Boards?," Working Papers 0006, Banco de España;Working Papers Homepage.
- Andres Sutt & Basil B. Zavoiceo & Adalbert KnÃ¶bl, 2002. "The Estonian Currency Board; Its Introduction and Role in the Early Success of Estonia's Transition to a Market Economy," IMF Working Papers 02/96, International Monetary Fund.
- Tornell, Aaron & Velasco, Andres, 1998. "Fiscal discipline and the choice of a nominal anchor in stabilization," Journal of International Economics, Elsevier, vol. 46(1), pages 1-30, October.
- Anne Marie Gulde & Juha KÃ¤hkÃ¶nen & Peter Keller, 2000. "Pros and Cons of Currency Board Arrangements in the Lead-Up to EU Accession and Participation in the Euro Zone," IMF Policy Discussion Papers 00/1, International Monetary Fund.
- Tavlas, George S, 2000. "On the Exchange Rate as a Nominal Anchor: The Rise and Fall of the Credibility Hypothesis," The Economic Record, The Economic Society of Australia, vol. 76(233), pages 183-201, June.
When requesting a correction, please mention this item's handle: RePEc:kap:ecopln:v:36:y:2003:i:2:p:111-133. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.