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


  • Horvath, Julius
  • Jonas, Jiri


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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    References listed on IDEAS

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    4. George S. Tavlas, 1993. "The ‘New’ Theory of Optimum Currency Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 663-685, November.
    5. Katerina Smidkova, 2003. "Estimating the FEER for the Czech Economy," Macroeconomics 0303014, EconWPA.
    6. Begg, David, 1998. "Pegging Out: Lessons from the Czech Exchange Rate Crisis," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 669-690, December.
    7. Fidrmuc, J. & Horváth, J., 1998. "Stability of Monetary Unions : Lessons from the Break-Up of Czechoslovakia," Discussion Paper 1998-74, Tilburg University, Center for Economic Research.
    8. 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.
    9. 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.
    10. Begg, David, 1997. "Monetary Policy during Transition: Progress and Pitfalls in Central and Eastern Europe, 1990-6," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 33-46, Summer.
    11. 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.
    12. 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.
    13. 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.
    14. 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.
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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, 2000. "The Political Business Cycles of EU Accession Countries," Tinbergen Institute Discussion Papers 00-085/2, Tinbergen Institute.
    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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