Exchange Rates in Central Europe: a Blessing or a Curse?

 
Author/Editor: Borghijs, Alain ; Kuijs, Louis
 
Publication Date: January 01, 2004
 
 
Summary: Central European accession countries (CECs) are currently considering when to adopt the euro. From the perspective of macroeconomic stabilization, the cost or benefit of giving up a flexible exchange rate depends on the types of asymmetric shocks hitting the economy and the ability of the exchange rate to act as a shock absorber. Economic theory suggests that flexible exchange rates are useful in absorbing asymmetric real shocks but unhelpful in the case of monetary and financial shocks. For five CECs-the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia-empirical results on the basis of a structural VAR suggest that in the CECs the exchange rate appears to have served as much or more as an unhelpful propagator of monetary and financial shocks than as a useful absorber of real shocks.
 
Subject(s): Exchange rates | Czech Republic | Hungary | Poland | Slovak Republic | Slovenia

Author's Keyword(s): Exchange rates | structural VAR | transition | CECs
 
English
Publication Date: January 01, 2004
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA0022004 Pages: 29
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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