A Model of Exchange Rate Regime Choice in the Transitional Economies of Central and Eastern Europe
The paper develops a model of exchange rate regime choice centered on the trade-off between internal price stability and external competitiveness and allowing for institutional costs of altering exchange rate arrangements. The main implication of the model is a nonlinear relationship between the rate of inflation and the choice of regime for the next period. The model also suggests that a major inflationary shock-like the one to which all Central and Eastern European economies were subject when they allowed prices to be determined by the market-should give rise to a tightening of the exchange rate regime, followed by a gradual introduction of more flexibility as inflation subsides. A series of regressions on a sample of 13 Central and Eastern European economies yield results consistent with the hypothesis.
|Date of creation:||01 Sep 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
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.:
- repec:imf:imfwpa:01/46 is not listed on IDEAS
- Alberto Alesina & Allan Drazen, 1989.
"Why are Stabilizations Delayed?,"
NBER Working Papers
3053, National Bureau of Economic Research, Inc.
- Chang, Roberto & Velasco, Andres, 2000.
"Financial Fragility and the Exchange Rate Regime,"
Journal of Economic Theory,
Elsevier, vol. 92(1), pages 1-34, May.
- Roberto Chang & Andres Velasco, 1998. "Financial Fragility and the Exchange Rate Regime," NBER Working Papers 6469, National Bureau of Economic Research, Inc.
- Chang, R. & Velasco, A., 1998. "Financial Fragility and the Exchange Rate Regime," Working Papers 98-05, C.V. Starr Center for Applied Economics, New York University.
- Roberto Chang & Andres Velasco, 1997. "Financial fragility and the exchange rate regime," Working Paper 97-16, Federal Reserve Bank of Atlanta.
- Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997.
"Does the Nominal Exchange Rate Regime Matter?,"
NBER Working Papers
5874, National Bureau of Economic Research, Inc.
- Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1996.
"Stabilization and growth in transition economies: The early experience,"
20631, University Library of Munich, Germany.
- Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 45-66, Spring.
- S. Fisher & R. Sahay & C. A. Vegh, 1997. "Stabilization and Growth in Transition Economies: The Early Experience," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
- Stanley Fischer & Carlos A. VÃ©gh Gramont & Ratna Sahay, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," IMF Working Papers 96/31, International Monetary Fund.
- Collins, Susan M., 1996. "On becoming more flexible: Exchange rate regimes in Latin America and the Caribbean," Journal of Development Economics, Elsevier, vol. 51(1), pages 117-138, October.
- Ernesto H. Stein & Jeffry Frieden, 2000. "The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview," Research Department Publications 3118, Inter-American Development Bank, Research Department.
- 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.
- Sachs, Jeffrey D, 1996. "Economic Transition and the Exchange-Rate Regime," American Economic Review, American Economic Association, vol. 86(2), pages 147-52, May.
- Paul R. Masson, 1999. "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," IMF Policy Discussion Papers 99/5, International Monetary Fund.
- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 589-610, August.
- Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
- Agenor, Pierre-Richard & Masson, Paul R, 1999. "Credibility, Reputation, and the Mexican Peso Crisis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 70-84, February.
- Guillermo A. Calvo & Carlos A. Vegh, 1999.
"Inflation Stabilization and BOP Crises in Developing Countries,"
NBER Working Papers
6925, National Bureau of Economic Research, Inc.
- Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614 Elsevier.
- Elmar B. Koch, 1997. "Exchange Rates and Monetary Policy in Central Europe - a Survey of Some Issues," Working Papers 24, Oesterreichische Nationalbank (Austrian Central Bank).
- Bernhard, William & Leblang, David, 1999. "Democratic Institutions and Exchange-rate Commitments," International Organization, Cambridge University Press, vol. 53(01), pages 71-97, December.
- Turnovsky, Stephen J, 1976. "The Relative Stability of Alternative Exchange Rate Systems in the Presence of Random Disturbances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 29-50, February.
- Michael B. Devereux & Charles Engel, 1998. "Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime," NBER Working Papers 6867, National Bureau of Economic Research, Inc.
- Sebastian Edwards, 1996. "The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes," NBER Working Papers 5756, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:01/140. 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: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.