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Exchange rate regimes in the transition economies: Case study of the Czech Republic: 1990-1997

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  • Horvath, Julius
  • Jonas, Jiri

Abstract

In this paper we re-examine the experience of the Czech Republic with the exchange rate regime during the period 1990-97. We review arguments for and against choosing a peg as they appeared in the early 1990s. Then, we evaluate the success of the peg in curbing inflationary pressures stemming from price liberalization. We also show some of its unpleasant consequences. In the second part of the paper we discuss the macroecononomic precedents which most likely led to the abandoning of the peg in May 1997. Finally, we present some thoughts on possible exchange rate developments, especially with respect to a potential future membership in the European Monetary Union.

Suggested Citation

  • Horvath, Julius & Jonas, Jiri, 1998. "Exchange rate regimes in the transition economies: Case study of the Czech Republic: 1990-1997," ZEI Working Papers B 11-1998, University of Bonn, ZEI - Center for European Integration Studies.
  • Handle: RePEc:zbw:zeiwps:b111998
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    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
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    3. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
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    5. Funke, Michael, 1997. "The Nature of Shocks in Europe and in Germany," Economica, London School of Economics and Political Science, vol. 64(255), pages 461-469, August.
    6. Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "The Stability of Monetary Unions: Lessons from the Breakup of Czechoslovakia," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 753-781, December.
    7. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
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    9. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1996. "Persistent Current Account Deficits: A Warning Signal?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 161-181, July.
    10. Katerina Smidkova, 2003. "Estimating the FEER for the Czech Economy," Macroeconomics 0303014, University Library of Munich, Germany.
    11. Begg, David, 1998. "Pegging Out: Lessons from the Czech Exchange Rate Crisis," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 669-690, December.
    12. C. Fred Bergsten & John Williamson, 1990. "Currency convertibility in Eastern Europe," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 35-49.
    13. De Grauwe, Paul & Vanhaverbeke, Wim, 1991. "Is Europe an Optimum Currency Area? Evidence from Regional Data," CEPR Discussion Papers 555, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Wojciech Maliszewski, 2002. "Monetary Policy in Transition: Structural Econometric Modelling and Policy Simulations," CASE Network Studies and Analyses 0246, CASE-Center for Social and Economic Research.
    2. Mark Hallerberg & Lúcio Vinhas de Souza & William Roberts Clark, 2002. "Political Business Cycles in EU Accession Countries," European Union Politics, , vol. 3(2), pages 231-250, June.
    3. Julius Horvath, 1999. "The May 1997 Currency Crisis in the Czech Republic," Post-Communist Economies, Taylor & Francis Journals, vol. 11(3), pages 277-298.

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