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Inconsistency of inflation targeting with the maastricht criteria: A case of impossible trinity

The paper discusses the issue of impossible trinity and its potential threat for Central and Eastern European countries operating under an inflation-targeting regime during the convergence process before entering the euro area. The threat of monetary policy inconsistency (the impossible trinity) consists of a conflict of the two monetary aims - the criterion of internal price stability and external stability of exchange rates. Providing study on monetary development in Hungary in 2003, as the National Bank of Hungary fought against the speculative attack on a strong edge of the Hungarian forint's fluctuation band. However, Bank's lowering the interest rates significantly together with consequent impacts on internal stability can be considered as monetary policy inconsistency.
Year of publication:
2005
Authors: Viktorová, Dana
Published in:
Politická ekonomie. - Vysoká Škola Ekonomická v Praze, ISSN 0032-3233. - Vol. 2005.2005, 1
Publisher: Vysoká Škola Ekonomická v Praze
Subject: exchange rate | inflation targeting | speculative attack | Maastricht criteria | impossible trinity | ERM-II
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Type of publication: Article
Classification: E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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