DP3799 The Credibility of the Hungarian Exchange Rate Regime 1997-98

Author(s): Adam Szeidl
Publication Date: February 2003
Keyword(s): credibility, exchange rate regime, market liquidity, transition
JEL(s): F31
Programme Areas: Transition Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3799

This study intends to analyse the credibility of the Hungarian exchange rate regime preceding and during the Russian stock market crisis and devaluation (in 1998). Throughout the Paper the comparison with the similar regime in Poland is stressed. The basic tool applied is a measure of market imperfections, more precisely deviations from covered interest rate parity. The size, sign and dynamics of these deviations provide insight into the expectations of market participants. These in turn yield conclusions concerning the credibility and vulnerability of the regimes. Policy implications also follow.