Real Convergence, Capital Flows, and Monetary Policy: Notes on the European Transition Countries
Susan Schadler, EURO ADOPTION IN CENTRAL AND EASTERN EUROPE: OPPORTUNITIES AND CHALLENGES, p. 209, International Monetary Fund, 2005
Posted: 18 Jun 2009 Last revised: 24 Jun 2009
Date Written: June 17, 2005
This paper is about real convergence, capital flows, and monetary policy in the European transition countries. It shows how differences in factor endowments coupled with Balassa-Samuelson real exchange rate effects will motivate capital flows, exacerbate the complexity of monetary policy formulation and implementation, and render the economy particularly sensitive to shifts in risk premia. It then goes on to assess alternative exchange rate regimes in this difficult context.
Keywords: Real Convergence, Capital Flows, and Monetary Policy
JEL Classification: E00, F21
Suggested Citation: Suggested Citation