Part V Strategies for Euro Adoption: Key Considerations
Author:
Susan M Schadler
Search for other papers by Susan M Schadler in
Current site
Google Scholar
Close

Abstract

Euro adoption in the Central European countries that will shortly accede to the European Union (EU) provides an opportunity to significantly boost the pace of convergence of income levels to those of existing EU countries. A key consideration in decisions on the timing of this move—that is, whether it should be an immediate policy priority or delayed until some notion of readiness is better defined—is what kinds of costs the move is likely to entail and whether waiting would reduce those costs or other vulnerabilities.

  • Collapse
  • Expand
  • Aitken, B., 1999, “Ireland and the Euro: Productivity Growth, Inflation, and the Real Exchange Rate,” IMF Staff Country Report 99/108 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Begg, D., and others, 2003, “Sustainable Regimes of Capital Movements in Accession Countries,” CEPR Discussion Paper 10 (London: Centre for Economic Policy Research).

    • Search Google Scholar
    • Export Citation
  • Bell, J., and D. Pain, 2000, “Leading Indicator Models of Banking Crises: A Critical Review,” Financial Stability Review (London: Bank of England), 12, Issue 9, Article 3, pp. 1329.

    • Search Google Scholar
    • Export Citation
  • Blanchard, O. J., and F. Giavazzi, 2002, “Current Account Deficits in the Euro Area: The End of the Feldstein-Horioka Puzzle?” Working Paper 03–05 (Cambridge, Massachusetts: MIT, Department of Economics, September).

    • Search Google Scholar
    • Export Citation
  • Borio, C., and P. Lowe, 2002, “Asset Prices, Financial and Monetary Stability: Exploring the Nexus,” BIS Working Papers, No. 114 (Basel: Bank for International Settlements, July).

    • Search Google Scholar
    • Export Citation
  • Bubula, A., and I. Otker-Robe, 2003, “Are Pegged Exchange Rate Regimes More Crisis Prone?” IMF Working Paper 03/223 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Cipriani, M., 2000, “The Balassa-Samuelson Effect in Transition Economies” (unpublished; Washington: International Monetary Fund).

  • Cottarelli, C., G. Dell’Ariccia, and I. Vladkova-Hollar, 2003, “Early Birds, Late Risers, and Sleeping Beauties: Bank Credit Growth to the Private Sector in Central and Eastern Europe and in the Balkans,” IMF Working Paper 03/213 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Eichengreen, B., and C. Arteta, 2000, “Banking Crises in Emerging Markets: Presumptions and Evidence,” Working Paper COO-115 (Berkeley, California: University of California, Center for International and Development Economics Research).

    • Search Google Scholar
    • Export Citation
  • European Commission, 1998, Convergence Report (Brussels).

  • European Commission, 2000, Convergence Report (Brussels, 05).

  • Frankel, J.A., 2003, “Experience of and Lessons from Exchange Rate Regimes in Emerging Economics,” NBER Working Paper 10032 (Cambridge, Massachusetts:National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Ghosh, A., A.-M. Gulde, and A. Wolfe, 1998, “Currency Boards: The Ultimate Fix?” IMF Working Paper 98/8 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gourinchas, P. O., R. Valdes, and O. Landerretche, 1999, “Lending Booms: Some Stylized Facts” (unpublished; Cambridge, Massachusetts: MIT).

    • Search Google Scholar
    • Export Citation
  • Gourinchas, P. O., R. Valdes, and O. Landerretche, 2001, “Lending Booms: Latin America and the World,” Economia (Spring), pp. 4799,

    • Search Google Scholar
    • Export Citation
  • Gulde, A.-M., J. Kähkönen, and P. Keller, 2000, “Pros and Cons of Currency Board Arrangements in the Lead-Up to EU Accession and Participation in the Euro Zone,” IMF Policy Discussion Paper 00/1 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Hardy, D., and C. Pazarbasioglu, 1998, “Leading Indicators of Banking Crises: Was Asia Different?” IMF Working Paper 98/91 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2003, Global Financial Stability Report (Washington).

  • Johansen, S., 1995, Likelihood-Based Inference in Cointegrated Vector Autoregressive Models (Oxford: Oxford University Press).

  • Kopits, G., and I. P. Székely, 2004, “Fiscal Policy Challenges of EU Accession for the Baltics and Central Europe,” in Structural Challenges for Europe, ed. by Gertrude Tumpel-Gugerell and Peter Mooslechner (Cheltenham, United Kingdom: Edward Elgar), pp. 27797,

    • Search Google Scholar
    • Export Citation
  • Kovács, M. A., 2002, “On the Estimated Size of the Balassa-Samuelson Effect in Five Central and Eastern European Countries,” NBH Working Paper 2002/5 (Budapest: National Bank of Hungary).

    • Search Google Scholar
    • Export Citation
  • Krugman, P., 1991a, Exchange Rate Targets and Currency Bands, ed. by P. Kruman and M. Miller (New York: Cambridge University Press).

  • Krugman, P., 1991b, “Target Zone and Exchange Rate Dynamics,” Quarterly Journal of Economics, Vol. 106, No. 3 (August), pp. 66982,

    • Search Google Scholar
    • Export Citation
  • Obstfeld, M., and K. Rogoff, 1995, “Mirage of Fixed Exchange Rates,” Journal of Economic Perspectives, Vol. 9, pp. 7396,

  • Rebelo, S., 1992, “Inflation in Fixed Exchange Rate Regimes: The Recent Portuguese Experience,” International Economic Studies, No. 517 (Stockholm: University of Stockholm, Institute for International Economic Studies).

    • Search Google Scholar
    • Export Citation
  • Schadler, S., P. Drummond, L. Kuijs, Z. Murgasova, and R. van Elkan, 2005, Adopting the Euro in Central Europe: Challenges in the Next Step in European Integration, IMF Occasional Paper (Washington: IMF).

    • Search Google Scholar
    • Export Citation
  • Ter-Minassian, T., ed., 1997, Fiscal Federalism in Theory and Practice (Washington: International Monetary Fund).

  • Tornell, A., and F. Westermann, 2002, “Boom-Bust Cycles in Middle-Income Countries: Facts and Explanation,” IMF Staff Papers, Vol. 49 (Special Issue), pp. 11155,

    • Search Google Scholar
    • Export Citation
  • Walters, A. A., 1990, Sterling in Danger: The Economic Consequences of Pegged Exchange Rates (London, Fontana/Collins, in association with the Institute of Economic Affairs).

    • Search Google Scholar
    • Export Citation
  • Williamson, J., 1985, The Exchange Rate System, 2nd ed. (Washington: Institute for International Economics).

  • Bordo, Michael D., and Lars Jonung, 1997, “The History of Monetary Regimes—Some Lessons for Sweden and the EMU,” Swedish Economic Policy Review, Vol. 4, No. 2, pp. 285358.

    • Search Google Scholar
    • Export Citation
  • Buiter, Willem H., and Clemens Grafe, 2002, “Patching up the Pact: Some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union,” CEPR Discussion Paper No. 3496 (London: Centre for Economic Policy Research).

    • Search Google Scholar
    • Export Citation
  • Cukierman, Alex, and Francesco Lippi, 2001, “Labour Markets and Monetary Union: A Strategic Analysis,” Economic Journal, Vol. 111 (July), pp. 54165.

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, 2003, “The Accession Economies’ Rocky Road to the Euro,” paper presented at the East-West Conference 2003 of the Oesterreichische Nationalbank in Vienna, 11.

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Ricardo Hausmann, and Ugo Panizza, 2003, “The Pain of Original Sin,” in Debt Denomination and Financial Instability in Emerging Market Economies, ed. by Barry Eichengreen and Ricardo Hausmann (Chicago: University of Chicago Press).

    • Search Google Scholar
    • Export Citation
  • European Central Bank, 2003, Policy Position of the Governing Council of the European Central Bank on Exchange Rate Issues Relating to the Acceding Countries (Frankfurt).

    • Search Google Scholar
    • Export Citation
  • Fischer, Stanley, 2001, “Exchange Rate Regimes: Is the Bipolar View Correct?” Journal of Economic Perspectives, Vol. 15, No. 2, pp. 324.

    • Search Google Scholar
    • Export Citation
  • Hochreiter, Edi, and Helmut Wagner, 2002, “The Road to the Euro—Exchange Rate Arrangements in Transition Economies,” Annals of the American Academy of Political and Social Science, Vol. 579 (January), pp. 16882.

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2002, World Economic Outlook. Recessions and Recoveries(Washington).

  • International Monetary Fund, 2003, World Economic Outlook, 09 (Washington).

  • Köhler, Horst, 2004, “The Euro—Towards Adopting the Common Currency in Central Europe,” keynote at the conference on “Euro Adoption in the Accession Countries—Opportunities and Challenges,” Prague, 02 23.

    • Search Google Scholar
    • Export Citation
  • Kovács, Mihály András, ed. 2002, “On the Estimated Size of the Balassa-Samuelson Effect in Five Central and Eastern European Countries,” National Bank of Hungary Working Paper No. 2002/5 (Budapest: National Bank of Hungary).

    • Search Google Scholar
    • Export Citation
  • Rogoff, Kenneth, 2003, “Globalization and Disinflation,” paper presented at the Jackson Hole Federal Reserve conference “Monetary Policy and Uncertainty: Adapting to a Changing Economy,” Jackson Hole, Wyoming, August. Available via the Internet: http://www.kc.frb.org/PUBLICAT/SYMPOS/2003/sym03prg.htm.

    • Search Google Scholar
    • Export Citation
  • Sinn, Hans-Werner, 2002, “Germany’s Economic Unification. An Assessment after Ten Years,” Review of International Economics, Vol. 10, No. 1, pp. 11328.

    • Search Google Scholar
    • Export Citation
  • Wagner, Helmut, 2000, “Which Exchange Rate Regimes in an Era of High Capital Mobility?” North American Journal of Economics and Finance, Vol. 11, No. 2, pp. 191203.

    • Search Google Scholar
    • Export Citation
  • Wagner, Helmut, 2001, “Implications of Globalization for Monetary Policy,” IMF Working Paper No. 01/184 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Wagner, Helmut, 2002, “Pitfalls in the European Enlargement Process—Challenges for Monetary Policy,” Discussion Paper No. 06/02 (Frankfurt: Economic Research Centre of the Deutsche Bundesbank).

    • Search Google Scholar
    • Export Citation
  • Wagner, Helmut, 2003, “Growth Effects of ‘Heterogeneous’ Economic Integration,” Journal of Economic Integration, Vol. 17, No. 4, pp. 62349.

    • Search Google Scholar
    • Export Citation
  • Wagner, Helmut, 2004, “Fiscal Issues in the New EU Member Countries: Prospects and Challenges,” IMF Working Paper, (Washington: IMF), forthcoming.

    • Search Google Scholar
    • Export Citation
  • Barro, Robert, and David Gordon, 1983, “Rules, Discretion, and Reputation in a Model of Monetary Policy,” Journal of Monetary Economics, Vol. 12, No. 1, pp. 101121.

    • Search Google Scholar
    • Export Citation
  • Brissimis, Sophocles, George Hondroyiannis, P. A. V. B. Swamy, and George S. Tavlas, 2003, “Empirical Modelling of Money Demand in Periods of Structural Change,” Oxford Bulletin of Economics and Statistics, Vol. 65, Issue 5, pp. 60528.

    • Search Google Scholar
    • Export Citation
  • Buiter, Willem H., and Clemens Grafe, 1999, “Central Banking and the Choice of Currency Regime in Accession Countries,” SUERF Studies No. 11 (Vienna: The Société Universitaire Européenne de Recherches Financiéres).

    • Search Google Scholar
    • Export Citation
  • Corden, W. Max, 1994, Economic Policy, Exchange Rates, and the International System (Chicago: University of Chicago Press).

  • Dellas, Harris, and George S. Tavlas, 2004, “Wage Rigidity and Monetary Union,” Economic Journal, forthcoming.

  • Eichengreen, Barry, 2003, “The Accession Economies’ Rocky Road to the Euro” (unpublished; Berkeley, California: University of California, Berkeley).

    • Search Google Scholar
    • Export Citation
  • European Central Bank, press release, 12 18, 2003, “Policy Position of the Governing Council of the European Central Bank on Exchange Rate Issues Relating to the Acceding Countries.”

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey, and Andrew Rose, 1997, The Endogeneity of the Optimum Currency Area Criteria, Discussion Paper No. 1473 (London: Centre for Economic Policy Research).

    • Search Google Scholar
    • Export Citation
  • Garganas, Nicholas, 1992, The Bank of Greece Model of the Greek Economy (Athens: Bank of Greece).

  • Handler, Heinz, and Eduard Hochreiter, 1998, Country paper, “Austria,” in Joining Europe’s Monetary Club: The Challenges for Smaller Member States, ed. by Jeffrey Frieden, Daniel Gros, and Eric Jones (New York: St. Martin’s Press).

    • Search Google Scholar
    • Export Citation
  • Hochreiter, Eduard, 2000, “Exchange Rate Regimes and Capital Mobility: Issues and Some Lessons from Central and Eastern European Applicant Countries,” North American Journal of Economics and Finance, Vol. 11, No. 2, pp. 15571.

    • Search Google Scholar
    • Export Citation
  • Hochreiter, Eduard, Georg Winckler, 1994, “Signaling a Hard Currency Strategy: The Case of Austria,” in Kredit und Kapital, Vol. 13.

    • Search Google Scholar
    • Export Citation
  • Hochreiter, Eduard, 1995, “The Advantages of Tying Austria’s Hands: The Success of the Hard Currency Strategy,” European Journal of Political Economy, Vol. 11, No. 1, pp. 83111.

    • Search Google Scholar
    • Export Citation
  • Hochreiter, Eduard, and George Tavlas, 2004, “On the Road Again: An Essay on the Optimal Path to EMU for the New Member States,” Journal of Economic Policy Modeling, Vol. 26, No. 7, pp. 793816.

    • Search Google Scholar
    • Export Citation
  • Hughes-Hallett, Andrew, and Laura Piscitelli, 1999, EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms, CEPR Discussion Paper No. 2068 (London: Centre for Economic Policy Research), 02.

    • Search Google Scholar
    • Export Citation
  • Kontomelis, Zenon, 2003, Exchange Rates Are a Matter of Common Concern: Policies in the Run-up to the Euro? European Economy—Economic Papers, No. 191 (Brussels: European Commission).

    • Search Google Scholar
    • Export Citation
  • Kopits, George, 2004, “Exchange Rate Policy in Central and Eastern Europe in the Context of EU-accession,” in Shaping the New Europe: The Challenge of EU Enlargement, ed. by Michael Landesmann (London: Macmillan), forthcoming.

    • Search Google Scholar
    • Export Citation
  • Moesen, Wim, and Joost Schollaert, 2003, “The Quality of Government within Euroland: Rankings and Correlates” (unpublished; Leuven, Belgium: Katholieke Universiteit Leuven).

    • Search Google Scholar
    • Export Citation
  • OECD, Economic Outlook, various issues, (Paris: Organization for Economic Co-operation and Development).

  • OECD, 1990/91, Economic Surveys: Greece (Paris: Organization for Economic Co-operation and Development).

  • Padoa-Schioppa, Tommaso, 2003, “Trajectories Towards the Euro and the Role of ERM II,” International Finance, Vol. 6, No. 1, pp. 12944.

    • Search Google Scholar
    • Export Citation
  • Papademos, Lucas, 1992, “Greece: Monetary and Financial System,” in The New Palgrave Dictionary of Money and Finance, ed. by Peter Newman, Murray Milgate, and John Eatwell (London: Macmillan).

    • Search Google Scholar
    • Export Citation
  • Rose, Andrew, and Eric Van Wincoop, 2001, “National Money as a Barrier to International Trade: The Real Case for Currency Union,” American Economic Review, Vol. 91, No. 2, pp. 38690.

    • Search Google Scholar
    • Export Citation
  • Tavlas, George, 1993, “The ‘New’ Theory of Optimum Currency Areas,” World Economy, Vol. 16, No.6, pp. 66386.

  • Tavlas, George, 2000, “On the Exchange Rate as a Nominal Anchor: The Rise and Fall of the Credibility Hypothesis,” Economic Record, Vol. 76, No. 233, pp. 183201.

    • Search Google Scholar
    • Export Citation
  • Von Hagen, Jürgen, and Jizhong Zhou, 2003, “Exchange Rate Policies on the Last Stretch” (unpublished; Bonn: University of Bonn, Germany).

    • Search Google Scholar
    • Export Citation