The Stability of Monetary Unions: Lessons from the Breakup of Czechoslovakia

Jan Fidrmuc*, Julius Horvath, Jarko Fidrmuc*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract (may include machine translation)

    In 1993, Czechoslovakia experienced a two-step breakup. On January 1, the country disintegrated as a political union, while preserving an economic and monetary union. Then, the Czech-Slovak monetary union collapsed on February 8. This paper analyzes the economic background of the two breakups from the perspective of the optimum currency area literature. The main finding is that the Czech and Slovak economies were vulnerable to asymmetric economic shocks, such as those induced by the economic transition. In particular, the stability of Czechoslovakia was undermined by the low correlation of permanent output shocks, low labor mobility, and higher concentration of heavy and military industries in Slovakia.

    Original languageEnglish
    Pages (from-to)753-781
    Number of pages29
    JournalJournal of Comparative Economics
    Volume27
    Issue number4
    DOIs
    StatePublished - Dec 1999

    Keywords

    • Czechoslovakia
    • Disintegration
    • Optimum currency areas

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