The Stability of Monetary Unions: Lessons from the Break-Up of Czechoslovakia

Posted: 13 Mar 2000

See all articles by Jan Fidrmuc

Jan Fidrmuc

L.E.M., Université de Lille; Brunel University - Department of Economics and Finance; CESifo (Center for Economic Studies and Ifo Institute); Global Labor Organization (GLO); Institute for Strategy and Analysis, Government Office of the Slovak Republic

Julius Horvath

Central European University (CEU) - Department of Economics

Jarko Fidrmuc

Zeppelin University Friedrichshafen

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.

JEL Classification: F33, F36, F42

Suggested Citation

Fidrmuc, Jan and Horvath, Julius and Fidrmuc, Jarko, The Stability of Monetary Unions: Lessons from the Break-Up of Czechoslovakia. Available at SSRN: https://ssrn.com/abstract=213548

Jan Fidrmuc (Contact Author)

L.E.M., Université de Lille ( email )

France

Brunel University - Department of Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom
+44 1895 266 528 (Phone)
+44 1895 269 770 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Global Labor Organization (GLO) ( email )

Collogne
Germany

Institute for Strategy and Analysis, Government Office of the Slovak Republic ( email )

Bratislava
Slovakia

Julius Horvath

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
36-1-327-3248 (Phone)
36-1-327-3243 (Fax)

Jarko Fidrmuc

Zeppelin University Friedrichshafen ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

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