A Model of Exchange Rate Regime Choice in the Transitional Economies of Central and Eastern Europe

 
Author/Editor: Klyuev, Vladimir
 
Publication Date: September 01, 2001
 
Electronic Access: Free Full text (PDF file size is 2,089KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: 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.
 
Series: Working Paper No. 01/140
Subject(s): Exchange rate regimes | Transition economies | Central and Eastern Europe | Albania | Bosnia and Herzegovina | Bulgaria | Croatia | Czech Republic | Estonia | Hungary | Latvia | Lithuania | Macedonia, FYR | Poland | Romania | Slovak Republic | Inflation | Economic models | Macedonia, former Yugoslav Republic of

Author's Keyword(s): Transition | exchange rate policy | inflation
 
English
Publication Date: September 01, 2001
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1402001 Pages: 42
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
Price Delivery Note: Prepayment required for individual copies. An annual subscription is $375.00 a year. It includes 12 monthly shipments and priority mail delivery. The Stock No. for the subscription is WPEA.
 
Please address any questions about this title to publications@imf.org