Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective

This paper estimates the exchange market pressure (EMP) in four Central European countries (Czech Republic, Hungary, Poland, Slovakia) over the period 1993-2006. Therefore, it is one of very few studies focused on this region and the very first paper applying concurrently model-dependent as well as model-independent approaches to EMP estimation to these countries. The results obtained suggest that the approaches lead to inconsistent findings. They often differ in identification of the principal development trends, as well as the magnitude and direction of the pressure. The paper provides evidence that a shift in the exchange rate regime towards the quasi-fixed ERM II should not stimulate EMP growth. However, it is highly probable that some episodes of the excessive EMP will make the fulfillment of the exchange rate stability criterion more difficult in all of the countries analyzed.