Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe After the Launch of EMU
The more advanced Central and Eastern European Countries (CEECs) face an evolving set of considerations in choosing their exchange rate policies. On the one hand, capital mobility is increasing, and this imposes additional constraints on fixed exchange rate regimes, while trend real appreciation makes the combination of low inflation and exchange rate stability problematic. On the other hand, the objectives of EU and eventual EMU membership make attractive a peg to the euro at some stage in the transition. The paper discusses these conflicting considerations, and considers the feasibility of an alternative monetary framework, inflation targeting.
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Acceding CEECs acquis communautaire adjustable pegs Advanced Economies Albania anchor for monetary Balassa-Samuelson model band is devalued Bulgaria capital flows Central and Eastern central bank countries negotiating accession crawling band Crawling peg credibility Croatia Currency Board DM Czech Republic devalued monthly developing countries ERM2 Estonia euro European eventual EMU membership exchange rate arrangements exchange rate policies exchange rate stability faster productivity growth fixed pegs floating De facto higher inflation Hungary IMF Policy Discussion implications of EMU increase in non-traded Independent floating industrial countries International Monetary Fund Latvia limit fluctuations Lithuania low inflation Maastricht Macedonia Managed floating monetary and exchange non-EU optimum currency area Poland Policy Discussion Paper policy instruments proportion real exchange rate relative price movements Romania Savastano sector Seigniorage Slovak Republic Slovenia standard Balassa-Samuelson strong capital structural Székely Temprano-Arroyo and Feldman trade transition economies transition process trend appreciation trend real appreciation Western Europe