The Choice of Exchange Rate Regime in Transition Economies-The Case of the Czech Republic

This article analyzes and discusses the main impact which a particular exchange rate arrangement has on the economic development of a small economy which is in a state of transition from a centrally planned economy to a market one. The case of the Czech Republic is used to illustrate the complexity of the decision regarding the choice of an appropriate exchange rate regime at the beginning of its economic transition. There will be a brief description of Czech exchange rate policy within the framework of unique macroeconomic and political circumstances at the beginning of economic transformation, which will be followed by the discussion of alternative choices at the very beginning, as well as possible solutions, or strategies, which might have been implemented in order to protect the country from a minor monetary crisis.