BIS Review 25/1997  -8-  As from the beginning of 1996 a one-week PRIBOR interest rate replaced bank reserves management as the operative target. The quantitative target has been replaced by an interest rate target with the aim to efficiently affect, on a daily basis, the interest rate level at the short end of the yield curve. This major change was facilitated by the gradual development of the money market and its cultivation by the CNB. The one-week PRIBOR rate is affected through sales of securities with a date specified in advance of their repurchase (repos) with one and two week maturities, for which a limited repo rate is announced. New challenge: monetary aggregates in a small open economy The monetary survey of the CNB indicates the structure of the money supply (M2) on the liabilities side (corresponding to the demand side) and its sources on the assets side (corresponding to the supply side). By comparing the assets and liabilities, one can reveal the different sources of the money supply. The main sources of money supply growth are particularly dependent on the specific conditions of each economy, reflecting mainly the proportion of the influence of domestic and foreign sources of growth.
Accordingly, the strategy followed aimed at a simultaneous implementation of the package of interrelated measures in order to secure sufficient impact on the behaviour of economic agents. Given the above general consensus, there were, however, widely differentiated stances as regards the contents of the respective “minimum packages”, their sequencing and the speed of their implementation. In previous discussions two alternative options - “fast” and “slow” movers - used to be identified as a shock therapy approach against a step-by-step, gradualistic or evolutionary type of approach. BIS Review 25/1997  -3-  The Czechoslovak scenario opted for a transition path which was implemented as quickly as feasible, implying some parallel features with the shock therapy approach, in particular with reference to one stroke, simultaneous liberalisation of domestic prices, foreign trade and foreign exchange, and the introduction of limited currency convertibility (on current account for registered domestic businesses) at the very beginning of the transition process. The shock therapy approach was developed for the stabilisation programmes and followed in some countries of Latin America as well as in Poland and former Yugoslavia, where the dominant target of the economic policy was to cope with hyperinflation, to stabilise the economy as much and as fast as possible. The initial conditions in the CSFR differed, however, from those of the countries mentioned. Strategy of systemic and structural reforms The programme of political and economic transformation was formed during 1990, started in January 1991, and continued in the Czech Republic after the split of Czechoslovakia.