E31 - Price Level; Inflation; DeflationReturn

The European integration process has had severe impacts on the development of exchange rates of member states' currencies. For small and open economies which trade large part of both their production input and output in foreign currencies the real exchange rates are of a special importance. This paper looks at the drivers behind the evolution of the real exchange rate of CZK within the European integration process. Beside the decomposition of the general long term trend, several factors of exchange rate fluctuations are depicted. Furthermore the recent halt in long term trend in real CZK appreciation towards EUR is discussed. Finally the study shows statistical simulation of future nominal EUR/CZK development with help of AR(I)MA models employed on different data series. Models' findings picture the gaps between observed and predicted values in the period following the exchange intervention of the Czech National Bank (CNB) from November 2013.

R. Cantillon was an irish merchant and banker whose birth, youth, financila activities and even death are secret. We know that he operated in France. Nowadays there has preserved the only his book, but this is often considered to be the first trully systematic economic treatise. Cantillon contributed to many economic topics and in many of them he was the first author.

This paper assesses the performance of the monetary policy in Egypt during the periods following the introduction of the economic reform and structural adjustment program (ERSAP). It sets out to answer the question why the Central Bank of Egypt (CBE) has not been able to achieve the goal of price stability under the ERSAP? The study compares the economic performance from the 1990s with both its counterpart in Germany, during the same periods, and with the economic performance of the Egyptian economy during the periods before the 1990s, i.e., 1975-1990. The study concludes that the CBE could have brought the rate of inflation down; nevertheless, the unemployment and real GDP growth rates have worsened and a price stability is still far away. The failure to achieve price stability is explained by two reasons, namely, a conflict between monetary policy objectives and a chronic budget deficit financed by issuing new money.

David Hume formulated the oldest theory of balance of payment adjustment mechanism in 1752. In his model foreign trade is sensitive to the difference between the home and foreign price levels and that is why it is also called price - specie - flow mechanism. Hume, likewise the whole generation of classical political economists coming after him, failed to see the impact of then strong British economy on economic variables of the rest of the world and in effect he developed a model for a small economy. Although the authorship of the quantitative monetary equation is ascribed to him, Hume did not represent pure monetarism, i.e. neutrality of money. He was well aware of the transition period, during which a change in money stock affect the real economics variables. For this reason it is necessary to abandon the constant real product model. Variability of the real product in the presented models makes it possible to create different stable levels of money stock and the real product in accordance with the initial conditions. The authors are of the opinion that the balance of payment adjustment mechanism can thus be source of instability of the real sector of the economy.