||The paper concentrates on the interaction between Czech trade and stabilisation policies in the 1990s. The authors argue that the initial transition package was a coherent one in which stabilisation policies supported both internal and external liberalisation of the economy. Later on, however, macroeconomic imbalances started to emerge, aggravated by institutional weaknesses and massive capital inflows in 1993-96. The central bank’s sterilisation policies proved to have little effect. Moreover, the fiscal policy was rather pro-cyclical. This led to a current account crisis in early-1997, followed by an enforced switch to floating and a painful stabilisation period. The authors analyse the causes of this crisis and the stabilisation policy mix using a simple econometric model of the current account. The crisis challenged the liberal approach to trade policy, leading to some minor backsliding in the trade policy, such as an import deposit scheme. However, the Czech government has relied primarily on pro-export measures rather than anti-import measures in its more activist trade policy.