Exchange Rate Regime-Related Risks in Transition Countries

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The exchange rate is one of the key prices in an economy. By directly affecting the behaviour and the decision making of economic agents such as households, entrepreneurs, governments, banks and other financial institutions it has a crucial impact on many important macroeconomic variables. The exchange rate can function as a vital anchor and a stabilising force. However, particularly against the backdrop of increasingly globalised capital flows, each exchange rate regime holds its specific immanent risks. The present dissertation delves in three chapters into two particular exchange rate regime related risk aspects - the peril of a currency crisis and the possibility of an inflation acceleration in the wake of the euro adoption hotly debated in most of the euro candidate countries.