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Exchange-Rate Policy In The Czech Republic: The Perils Of Sticking To Fixed Exchange Rates

Fabrizio Coricelli
Published 1999 · Economics
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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.



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