Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39630
Authors: 
Orlowski, Lucjan T.
Year of Publication: 
2004
Series/Report no.: 
ZEI working paper B 05-2004
Abstract: 
This study proposes the adoption of money growth rules as indicator variables of monetary policies by the countries converging to a common currency system, in particular, by the eurozone candidate countries. The analytical framework assumes an inflation target as the ultimate policy goal. The converging countries act in essence as “takers” of the inflation target, which, in this case, is the eurozone’s inflation forecast. The study advances a forwardlooking money growth model that might be applied to aid monetary convergence to the eurozone. However, feasibility of adopting money growth rules depends on stable relationships between money and target variables, which are low inflation and stable exchange rate. Long-run interactions between these variables are examined for Poland, Hungary and the Czech Republic by employing a Johansen cointegration test, along with short-run effects assessed with a vector error correction procedure.
Subjects: 
common currency system
eurozone
monetary convergence
money growth rules
inflation targeting
JEL: 
E42
E52
F36
P24
Document Type: 
Working Paper

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