Monetary stabilization in countries in transition

Axel Jochem

International Advances in Economic Research, 1999, vol. 5, issue 1, 37-47

Abstract: The best way to prevent hyperinflation when domestic prices are liberalized is to initiate the transition from a planned economy to a market economy with a currency reform. In the following period, moderate inflation and flexible exchange rates are suitable to facilitate relative price adjustments. Only after the bulk of alignments has been accomplished can a switch in the exchange rate regime be convenient. The nominal peg of a stable reference currency lowers the level and the variance of domestic inflation rates. The credibility of an exchange rate target may best be achieved by combining a currency board (objective sustainability) with a crawling peg (political sustainability). Price stability can be realized in the long run by reducing the annual depreciation rate in regular, preannounced steps. Copyright International Atlantic Economic Society 1999

Date: 1999
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DOI: 10.1007/BF02295029

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