This paper examines whether the monetary model is a reasonable framework for exchange rate movements in Central and Eastern European countries. We apply the methodology for non-stationary panels, which allows for cross-sectional dependence. We also choose the timespan of data free of high...

Though the hypothesis that exchange rate regimes fully predetermine monetary policy in the face of external shocks hardly finds any advocates in the field of theory, it has crept into empirical research. This study adopts a careful and rigorous empirical approach that looks at monetary policy...