DP457 The Roles of Monetary Policy in the Process of Economic Reform in Eastern Europe
Author(s): | Peter Bofinger |
Publication Date: | September 1990 |
Keyword(s): | Central Bank, Europe, Inflation, Monetary Policy |
JEL(s): | E31, E52, E58 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=457 |
The first part of the paper analyzes the inflationary risks associated with price liberalization, the welfare costs of inflation and the difficulties of East European central banks in pursuing non-inflationary policies. The main obstacles are the low credibility of stabilization policies and a strategy problem, which is related to the high instability of real and financial sectors. The second part analyzes three options of an ecu-peg for East European currencies: a unilateral peg to the ECU, membership in the Exchange Rate Mechanism of the European Monetary System, and participation in a future European Monetary Union (EMU).