The End of Moderate Inflation in Three Transition Economies?

Abstract

This paper examines the moderation of inflation in three transition economies, the Czech Republic, Hungary and Poland at the end of the 1990s. We argue that the institutions for the conduct of monetary policy in these countries were relatively weak and that monetary policy was unsupported by fiscal policy and hampered by multiple objectives. Using a VAR model of inflation, we show that, under a variety of assumptions, foreign prices and the persistence of inflation were the key determinants of inflation in these countries. From this finding we conclude that the moderation of inflation in the Czech Republic, Hungary and Poland was due largely to the decline in import prices from 1997 on, and thus it is likely be a temporary phenomenon. JEL Classification: P2 and E5

Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary

“…The zloty (zl) was devalued from 5,560 zl/US$ to 9,500 zl/US$ and was pegged at the latter rate. Monetary and fiscal policies were tightened, enabling the government to achieve a surplus equivalent to 3.1% of GDP in 1990 (Table 2), and credit creation was sharply curtailed (Brada and Kutan, 1999). The consequences of stabilization and liberalization were sufficiently virulent, both in the upsurge in prices and in the decline in production, to lead to an easing of macroeconomic policy late in 1990.…”

Investigating Croatian Inflation through the Cointegration with Structural Break Approach

“…This holds in: Albania (Haderi et al, 1999), Russia (Nikolic, 2000), Slovenia (Ross, 2000) and in Czech Republic, Hungary and Poland (Brada and Kutan, 2002). The exchange rate seems to exert a notable impact on inflation in Poland (Golinelli and Orsi, 2001), Czech Republic and Hungary (Golinelli and Orsi, 2001), Slovenia (Ross, 2000) and in the three Baltic states (Masso and Staehr, 2005).…”

Currency Substitution and Central Bank Independence in the Central and Eastern European Economies

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