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Exchange rate regimes in transitive economies and the effect of exchange rate policy on the development of inflation and economic growth

  • Jaroslava Durčáková
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    In this paper we discuss the issue of the choice of exchange rate regimes in transitive economies and the effect of exchange rate policy on the development of macroeconomic indicators (e. g. the average growth rate of real GDP in domestic currency and the development of domestic inflation). It is obvious that exchange rate policy is not a passive factor, at least in the medium term. Our analysis indicates that the fixed foreign exchange rate arrangements policy does not necessarily mean stability of the foreign exchange rates. Neither percentage exchange rate changes of fixed rates, nor their volatility measured by the standard deviation are lower than the average change is over the examined period. Our analysis indicates also that the inflation rate is growing in accordance with the growth of depreciation of the foreign exchange rate and the growth of its volatility measured by the standard deviation. It was cleared that the higher volatility of the effective nominal exchange rate is reflected by the lower average economic growth rate of transitive countries.

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    Article provided by University of Economics, Prague in its journal Politická ekonomie.

    Volume (Year): 2009 (2009)
    Issue (Month): 3 ()
    Pages: 344-360

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    Handle: RePEc:prg:jnlpol:v:2009:y:2009:i:3:id:688:p:344-360
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