Exchange Rate Regimes in Selected Advanced Transition Economies

Abstract

The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Policy Discussion Papers describe research in progress by the authors) and are published to elicit comments and to further debate.Since beginning economic transition, the Czech Republic, Estonia, Hungary, Poland, and Slovenia have-with much success-employed diverse exchange rate regimes. As these countries approach EU accession, they will need to avoid the perils of too much or too little exchange rate variability when capital flows are likely to be large and volatile; narrow band arrangements in particular could be problematic. The exception is Estonia, where there are good arguments for retaining the currency board arrangement. Countries wishing to join the euro area at an early stage should not leave the removal of remaining capital controls to the last minute.