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Monetary stabilization in countries in transition

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  • Axel Jochem

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

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  • Axel Jochem, 1999. "Monetary stabilization in countries in transition," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 37-47, February.
    • Handle: RePEc:kap:iaecre:v:5:y:1999:i:1:p:37-47:10.1007/bf02295029
    DOI: 10.1007/BF02295029
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