ABSTRACT
This chapter deals with selected, mutually dependent problems of monetary policy that demonstrate the specific position of the Czech economy, that is to say, an economy that is undergoing transformation. It provides the effect of a stable exchange rate as a nominal anchor for an economy in transition, one that is undergoing notable changes in price relations. In the Czech Republic, where currency was not convertible for capital transactions, the anchoring role of the exchange rate was utilized by means of other mechanisms than are used in market economies with a completely convertible exchange rate. In July, 1994, the Czech economy will begin the forty-second month of currency stability, which distinguishes it dramatically from almost all the other economies undergoing transformation. The chapter discusses the problem of indebtedness among different enterprises and stemming from that, their inability to pay. Maintaining a fixed rate will require that domestic monetary policy follow development in countries to which the Czech koruna is linked.
