IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The end of moderate inflation in three transition economies?

  • Josef C. Brada
  • Ali M. Kutan

This paper examines the ending of moderate rates of inflation in three transition economies, the Czech Republic, Hungary and Poland at the end of 1998. We argue that the institutions for the conduct of monetary policy in these countries were relatively weak and that monetary policy was unsupported by fiscal policy and hampered by multiple objectives. Using a VAR model of inflation, we show that, under a variety of assumptions, foreign prices and the persistence of inflation are the key determinants of inflation in these countries. From this finding we conclude that the end of moderate inflation in the Czech Republic, Hungary and Poland was largely due to the decline in import prices in the second half of 1998, and thus it may be a temporary phenomenon.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1999-003.

in new window

Date of creation: 1999
Date of revision:
Handle: RePEc:fip:fedlwp:1999-003
Contact details of provider: Postal: P.O. Box 442, St. Louis, MO 63166
Fax: (314)444-8753
Web page:

More information through EDIRC

Order Information: Email:

References listed on IDEAS
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.:

as in new window
  1. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  2. Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
  3. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  4. Rudebusch, Glenn D, 1993. "The Uncertain Unit Root in Real GNP," American Economic Review, American Economic Association, vol. 83(1), pages 264-72, March.
  5. Kutan, Ali M. & Orlowski, Lucjan T., 2006. "Monetary convergence to the Euro," Economic Systems, Elsevier, vol. 30(4), pages 307-310, December.
  6. Orlowski, Lucjan T., 2001. "Monetary convergence of the EU candidates to the Euro: A theoretical framework and policy implications," ZEI Working Papers B 25-2001, ZEI - Center for European Integration Studies, University of Bonn.
  7. Josef C. Brada & Ali M. Kutan, 1999. "The persistence of moderate inflation in the czech republic and the czk crisis of may 1997," Prague Economic Papers, University of Economics, Prague, vol. 1999(4).
  8. Begg, David, 1998. "Pegging Out: Lessons from the Czech Exchange Rate Crisis," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 669-690, December.
  9. Hafer, R W & Kutan, A M, 1997. "More Evidence on the Money-Output Relationship," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 48-58, January.
  10. DeJong, David N. & Whiteman, Charles H., 1991. "Reconsidering 'trends and random walks in macroeconomic time series'," Journal of Monetary Economics, Elsevier, vol. 28(2), pages 221-254, October.
  11. Miguel A. Savastano & Paul R. Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  12. Szapary, Gyorgy & Jakab, Zoltan M., 1998. "Exchange Rate Policy in Transition Economies: The Case of Hungary," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 691-717, December.
  13. Anthony J. Richards & Gunnar Tersman, 1995. "Growth, Nontradables, and Price Convergence in the Baltics," IMF Working Papers 95/45, International Monetary Fund.
  14. DeJong, David N. & Nankervis, John C. & Savin, N. E. & Whiteman, Charles H., 1992. "The power problems of unit root test in time series with autoregressive errors," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 323-343.
  15. Martin Feldstein & James H. Stock, 1994. "The Use of a Monetary Aggregate to Target Nominal GDP," NBER Chapters, in: Monetary Policy, pages 7-69 National Bureau of Economic Research, Inc.
  16. J. P. Bonin & M. E. Schaffer, 1995. "Banks, firms, bad debts and bankruptcy in Hungary 1991-4," LSE Research Online Documents on Economics 20764, London School of Economics and Political Science, LSE Library.
  17. Gottschalk, Jan & Moore, David, 2001. "Implementing Inflation Targeting Regimes: The Case of Poland," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 24-39, March.
  18. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  19. Hawkins, Robert G & Macaluso, Donald, 1977. "The Avoidance of Restrictive Monetary Policies in Host Countries by Multinational Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(4), pages 562-71, November.
  20. Hafer, R. W. & Kutan, Ali M., 2001. "Detrending and the money-output link: International evidence," ZEI Working Papers B 19-2001, ZEI - Center for European Integration Studies, University of Bonn.
  21. DeJong, David N & Whiteman, Charles H, 1991. "The Case for Trend-Stationarity Is Stronger Than We Thought," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(4), pages 413-21, Oct.-Dec..
  22. DeJong, David N., 1992. "Co-integration and trend-stationarity in macroeconomic time series : Evidence from the likelihood function," Journal of Econometrics, Elsevier, vol. 52(3), pages 347-370, June.
  23. Dornbusch, Rudiger & Fischer, Stanley, 1991. "Moderate inflation," Policy Research Working Paper Series 807, The World Bank.
  24. van Wijnbergen, Sweder, 1997. "On the Role of Banks in Enterprise Restructuring: The Polish Example," Journal of Comparative Economics, Elsevier, vol. 24(1), pages 44-64, February.
  25. Dittus Peter, 1994. "Bank Reform and Behavior in Central Europe," Journal of Comparative Economics, Elsevier, vol. 19(3), pages 335-361, December.
  26. William J. McDonough, 1997. "A framework for the pursuit of price stability," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 1-7.
  27. Desai, Padma, 1998. "Macroeconomic Fragility and Exchange Rate Vulnerability: A Cautionary Record of Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 621-641, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1999-003. 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: (Anna Xiao)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.