Comparing Exchange Rate Regimes in the Balkans
Introduction:
During the 1990s, a succession of exchange rate crises in countries operating fixed exchange rate regimes furthered the view that this type of exchange rate arrangement was no longer appropriate for a world of large capital flows (Fischer, 2001). A preference for "corner solutions" was apparent both in academic circles and amongst policy-makers: either fully floating regimes or super-fixed regimes like dollarization or a currency board. The collapse of the Argentinean currency board regime in 2002 (Edwards, 2002) had a tremendous impact on its real economy and political developments there. This challenged the aforementioned growing policy consensus. Indeed, it hastened a trend already apparent for emerging market countries to move to inflation targeting (IT) regimes. This has been mirrored in Eastern Europe with the Czech Republic, Hungary and Poland all having adopted IT regimes in the last decade.