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Monetary Independence of Central and Eastern European Economies with Flexible Exchange Rate Regimes

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  • Marek A. Dąbrowski
  • Monika Papież
  • Sławomir Śmiech

Abstract

According to the macroeconomic trilemma, the floating exchange rate regime provides room for monetary independence. The paper examines whether this is the case in CEE economies. The ARDL bounds tests are used. A level relationship between domestic and euro interest rates is found in all CEE countries, although evidence for Hungary is weak. It is demonstrated that the crude monetary independence indices do not capture the relevant relationship adequately. It is concluded that the Czech Republic and Poland will be able to retain monetary independence when the ECB embarks on the tightening its monetary policy, but not Hungary or Romania.

Suggested Citation

  • Marek A. Dąbrowski & Monika Papież & Sławomir Śmiech, 2019. "Monetary Independence of Central and Eastern European Economies with Flexible Exchange Rate Regimes," Eastern European Economics, Taylor & Francis Journals, vol. 57(4), pages 295-316, July.
    • Handle: RePEc:mes:eaeuec:v:57:y:2019:i:4:p:295-316
    DOI: 10.1080/00128775.2019.1610897
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    Cited by:

    1. Chee-Hong Law, 2023. "The Impacts of International Reserves on Monetary Independence in Emerging Countries: An Asymmetric Analysis," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(1), pages 53-71, January.

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