ABSTRACT
This chapter focuses on some important aspects of macroeconomic development in the Czech Republic during the 1991–1996 period. It describes the state of the economy prior to transition, the policy decisions made immediately after the transition. The chapter analyzes macroeconomic policy in the post-transition period focusing on the balance of payments and the exchange rate. It identifies problem areas in the economy along with their impact on macroeconomic development. The initial macroeconomic stabilization in the former Czechoslovakia, in the aftermath of the velvet revolution in 1989, was undoubtedly successful. The development in the Czech Republic supports the idea that if the transition is not conducted rigorously and in a consistent fashion, the improvement in the macroeconomic situation might be only temporary and the desired rapid growth in the long run will not occur. The Czech Republic has been cited as a country that has made a successful transition from a centrally planned economy to a market economy.
