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

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Price:  $15.00

Author/Editor: Alain Borghijs, Louis Kuijs
Release Date: © January, 2004
ISBN : 978-1-45184-179-4
Stock #: WPIEA0022004
Stock Status: On back-order

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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.

More publications in this series: Working Papers

More publications by: Alain Borghijs ; Louis Kuijs