Monetary Policy Regimes, Disinflation and Growth in Central Europe

At the end of the 80’s Central European Countries started to abandon their administratively fixed exchange rates and graudally adopted new monetary regimes with more or less emphasis on the exchange rate, inflation and growth targets. This study analyses the economic background of the choice of monetary regime in these countries and their success in curbing inflation. The main question the paper addresses is whether any of these monetary strategies can be regarded as more beatific in the pursuit for achieving a close to eurozone level inflation. The paper also points out that the antiinflationary policy can only be efficient in the long run if it does not endanger the keeping up of the eurozone average growth rate in these converging economies. A panel examination delivered by the study of 15 Central and Southern European Countries – similarly to De Grauwe and Schnabl, 2008 – provides evidence of inflation targeting as being an effective policy to reduce inflation, however, reveals biased results concerning economic performance.