Advertisement

Exchange-Rate Policy in the Czech Republic: The Perils of Sticking to Fixed Exchange Rates

  • Fabrizio Coricelli

Abstract

The stability of the Czech crown during the period 1991 to 1997 (during 1991 to 1993 the crown of the former Czechoslovakia) was considered an example of success in maintaining macroeconomic stability in a period of radical economic changes. The budget deficit was under control throughout the transition, monetary policy was always prudent, inflation was among the lowest in transition economies, and unemployment remained extremely low (Table 12.1). The stability of the crown coincided as well with political stability: the Czech Republic was the only transition country that did not experience a change in the government since the start of reforms. Most transition economies that adopted the exchange rate as a nominal anchor during stabilization abandoned it soon after they were out of the stabilization phase.

Keywords

Exchange Rate Czech Republic Monetary Policy Central Bank Current Account 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Boeri, T., and G. Perasso. (1997). “Privatization and Corporate Governance: Some Lessons from the Experience of Transitional Economies.” Mimeo, OECD, Paris.Google Scholar
  2. Calvo, G. (1995). “Varieties of Capital Market Crises.” Paper, University of Maryland, April.Google Scholar
  3. Calvo, G., and F. Coricelli. (1992). “Stabilizing a Previously Centrally Planned Economy: Poland 1990.” Economic Policy, 14 (April): 176–226.Google Scholar
  4. Calvo, G., and C. Vegh. (1994). “Inflation Stabilization and Nominal Anchors.” Contemporary Economic Policy, 12 (April): 35–45.Google Scholar
  5. Calvo, G., C. Reinhart, and C. Vegh. (1995). “Targeting the Real Exchange Rate: Theory and Evidence.” Journal of Development Economics, 47(1): 97–133.CrossRefGoogle Scholar
  6. Chadha, B. (1991). “Wages, Profitability, and Growth in a Small Open Economy.” International Monetary Fund Staff Papers, 38(1): 58–82.Google Scholar
  7. Chadha, B., and F. Coricelli. (1997). “Fiscal Constraints and the Speed of Transition.” Journal of Development Economics, 52: 221–243.CrossRefGoogle Scholar
  8. Coricelli, F., and G.M. Milesi-Ferretti. (1993). “On the Credibility of ‘Big Bang’ Programs.” European Economic Review, 37: 387–395.CrossRefGoogle Scholar
  9. Czech National Bank. (1996). Annual Report 1995. Prague: CNB.Google Scholar
  10. Czech National Bank. (1997). Annual Report 1996. Prague: CNB.Google Scholar
  11. Cukierman, A. (1995). “Towards a Systematic Comparison Between Inflation Targets and Money Targets.” In L. Leiderman and L. Svensson (eds.), Inflation Targets. London: Centre for Economic Policy Research.Google Scholar
  12. Dornbusch, R. (1980). “Monetary Stabilization, Intervention, and Real Appreciation.” In Open Economy Macroeconomics. New York: Basic Books.Google Scholar
  13. Dornbusch, R., S. Fischer, and P. Samuelson. (1997). “Comparative Advantage, Trade and Payments in a Ricardian Model with a Continuum of Goods.” American Economic Review, 67: 823–839.Google Scholar
  14. Drazen, A., and P. Masson. (1992). “Credibility of Policies and Credibility of Policymakers.” Mimeo, IMF.Google Scholar
  15. Halpern, L., and C. Wyplosz. (1995). “Equilibrium Real Exchange Rates in Transition.” CEPR Discussion Paper Series 1145.Google Scholar
  16. Hrncir, M. (1995). “Fixed Exchange-Rate Regime in The Stages of Transition: Lessons from the Czech Case.” Mimeo.Google Scholar
  17. International Monetary Fund. (1996). World Economic Outlook. Washington, DC: IMF.Google Scholar
  18. Janackova, S. (1994). “Transforming the Czech Economy: Role of Convertibility and Exchange-Rate Anchor.” Institute for Economics, CNB, Working Paper 24.Google Scholar
  19. Klaus, Vaclav, et al. (1997). Stabilization and Recovery Program. May 28.Google Scholar
  20. Leiderman, L., and G. Bufman. (1995). “Searching for Nominal Anchors in Shock-Prone Economies in the 1990s: Inflation Targets and Exchange-Rate Bands.” Tel University, Discussion Paper 4-95.Google Scholar
  21. Mutl, J. (1997). “Capital Flows and Exchange-Rate Policy.” M.A. thesis, Central European University, Budapest.Google Scholar
  22. Obstfeld, M., and K. Rogoff. (1996). Foundations of International Macroeconomics. Cambridge, MA: MIT Press.Google Scholar
  23. Obstfeld, M., and K. Rogoff. (1995). “The Mirage of Fixed Exchange Rates.” NBER Working Paper Series, 5191.Google Scholar
  24. OECD. (1996). OECD Economic Surveys: The Czech Republic. Paris: OECD.Google Scholar
  25. Sachs, J., A. Thornell, and A. Velasco. (1996). “Financial Crises in Emerging Markets: The Lessons from 1995.” Brookings Papers on Economic Activity 1.Google Scholar
  26. Sargent, T. (1982). “The Ends of Four Big Inflations.” In R. Hall (ed.), Inflation. Chicago: NBER, University of Chicago Press.Google Scholar

Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Fabrizio Coricelli
    • 1
  1. 1.CEU Budapest, CEPRUniversity of SienaHungary

Personalised recommendations