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Exchange rate stability, inflation, and growth in (South) Eastern and Central Europe

de Grauwe, Paul and Schnabl, Gunther (2008) Exchange rate stability, inflation, and growth in (South) Eastern and Central Europe. Review of Development Economics, 12 (3). pp. 530-549. ISSN 1363-6669

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Identification Number: 10.1111/j.1467-9361.2008.00470.x

Abstract

The authors analyze the impact of the exchange rate regime on inflation and output in (South) Eastern and Central Europe. For the whole observation period the estimations reveal a significant impact of exchange rate stability on low inflation as well as a highly significant positive impact of exchange stability on real growth. When subdividing the period into a “high-inflation” period (1994–97) and a “low-inflation period” (1998–2004), and when removing outliers from the sample, the evidence in favor of a positive association between exchange rate stability and inflation disappears. The association of exchange rate stability with higher real growth remains robust. These findings suggest that membership of the (South) Eastern and Central European countries in the European Monetary Union would have a positive impact on these countries' growth rates.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2008 Blackwell Publishing
Divisions: European Institute
Subjects: H Social Sciences > HG Finance
J Political Science > JZ International relations
JEL classification: F - International Economics > F3 - International Finance > F31 - Foreign Exchange
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Date Deposited: 05 Oct 2012 13:34
Last Modified: 17 Sep 2024 16:24
URI: http://eprints.lse.ac.uk/id/eprint/46597

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