Post-Crisis Growth and Integration in Europe
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Post-Crisis Growth and Integration in Europe

Catching-up Strategies in CESEE Economies

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

Against the backdrop of the financial crisis that unfolded in 2008, this book deals with policy challenges going forward, focusing in particular on the ongoing catching-up process in Central, Eastern and South-Eastern European countries.
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Chapter 13: Monetary Policy Challenges in the CESEE Region – the Case of Poland

Marek Belka


Marek Belka1 INTRODUCTION Recent decades have witnessed a substantial rise in financial integration, which has increasingly encompassed also emerging economies. Although substantial benefits may be derived from increased access to international financial markets, rising financial integration also brings about risks to the macroeconomic and financial stability of emerging economies. In particular, developments in a number of emerging European economies (predominantly the Baltic countries, Hungary and Ukraine) in the run-up to and during the recent global financial crisis provide an illustration of the destabilizing potential of large and volatile capital inflows, that is, their potential to fuel unstable credit and asset price booms resulting in excessive indebtedness and vulnerability to economic and financial shocks. These experiences, together with the rebound in capital flows to emerging economies in the aftermath of the crisis, reignited the debate on risks related to financial integration and the constraints it puts on macroeconomic management in small open economies, including monetary policy making – the debate that was also vivid in the aftermath of the financial crises that affected a number of emerging economies throughout the 1980s and 1990s (for example, the Mexican crisis, the Asian crisis). Preserving macroeconomic and financial stability in an environment of highly integrated financial markets remains an important concern for economic authorities in emerging Europe, including Poland. From the Polish central bank’s perspective, two issues related to growing financial integration are of particular importance, both of which will be tackled more extensively in the following sections. First, trade-offs faced by monetary policy in...

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