Problems of the Czech economy, 1993-1997

This article discusses the main problems of the transformation of the Czech economy in 1993-1997. In the first part the author analyzes the four basic macroeconomic indicators - the development of gross domestic product, infl ation, unemployment, and the balance of payments (author does not discuss t he problems about changes in institutional framework of the Czech transform ation). He stresses the problem of having a growth rate of domestic demand that outpaces that of the gross domestic product, a situation that led to a high current account deficit. The other main problem is the structure of C zech foreign trade, as Czech exports have a high import elasticity coeffici ent. The author also discusses the development of core inflation and the pr oblem of rising unemployment. The second part describes the fiscal and monetary policy mix in the Czech e conomy in 1993-1997. The author focuses on the growth rate of the real fisc al expenditures and incomes; he presents an analysis of the fiscal budget d eficit. The influence of monetary policy restriction on domestic demand, fo reign trade, the growth rate of the GDP, and the exchange rate are also add ressed. In his conclusion, the author outlines his recommendations for the present economic situation, using a Swan-Salter diagram to explain his solutions fo r the economic policy mix. He sees development of foreign trade as the key element, and would like to instigate a discussion about changing the moneta ry and exchange rate policies. The Czech central bank could support Czech e xports by keeping the real exchange rate stable, he argues, and the solutio n maybe lies in establishing the crawling peg exchange rate regime.