Stability of monetary unions: Lessons from the break-up of Czechoslovakia

Jan Fidrmuc, Julius Horvath and Jarko Fidrmuc

No B 17-1999, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies

Abstract: In 1993, Czechoslovakia experienced a two-step break-up. On January 1, the country disintegrated as a political union, while preserving an economic and monetary union. Then, the Czech-Slovak monetary union collapsed on February 8. This paper analyzes the economic background of the two break-ups from the perspective of the optimum currency area literature. The main finding is that the Czech and Slovak economies were vulnerable to asymmetric economic shocks, such as those induced by the economic transition. In particular, the stability of Czechoslovakia was undermined by low correlation of permanent output shocks, low labor mobility and higher concentration of heavy and military industries in Slovakia.

Keywords: Optimum currency areas; Disintegration; Czechoslovakia (search for similar items in EconPapers)
JEL-codes: F33 F36 F42 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (56)

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Related works:
Journal Article: The Stability of Monetary Unions: Lessons from the Breakup of Czechoslovakia (1999)
Working Paper: Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia (1999)
Working Paper: Stability of Monetary Unions: Lessons from the Break-Up of Czechoslovakia (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zeiwps:b171999

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