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Monetary Convergence and Risk Premiums in the EU Accession Countries

  • Lucjan Orlowski


This study examines the impact of various monetary policy regimes on the ability to lower inflation and exchange rate risk premiums in the EU accession countries as they undergo monetary convergence to the eurozone. It proposes a monetary policy framework of flexible targeting of relative inflation risk premium that is believed to be credible and useful for managing these two categories of risk. A model of inflation and exchange rate risk premiums within the context of inflation targeting is developed. Recent trends in these risk premiums in Hungary, the Czech Republic and Poland are tested by employing the threshold ARCH (TARCH) model. Copyright Kluwer Academic Publishers 2003

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 14 (2003)
Issue (Month): 3 (July)
Pages: 251-267

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Handle: RePEc:kap:openec:v:14:y:2003:i:3:p:251-267
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  1. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
  2. Manfred J.M. Neumann & Jrgen von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 127-148.
  3. Andrew Haldane, 1997. "Some Issues in Inflation Targeting," Bank of England working papers 74, Bank of England.
  4. Jordi Galí & Tommaso Monacelli, 2015. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Working Papers 11, Barcelona Graduate School of Economics.
  5. Laurence Ball, 1998. "Policy Rules for Open Economies," NBER Working Papers 6760, National Bureau of Economic Research, Inc.
  6. 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.
  7. R. Golinelli & R. Rovelli, 2001. "Interest Rate Rules and Inflation Targeting in Three Transition Countries," Working Papers 429, Dipartimento Scienze Economiche, Universita' di Bologna.
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