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IMF Country Report No. 15/98

Abstract

IMF Country Report No. 15/98

Contents

IMF Country Report No. 15/98

SELECTED ISSUES

April 2015

This Selected Issues Paper on Central and Eastern Europe: New Member States (NMS) Policy Forum, 2014 was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed on February 26, 2015.

Copies of this report are available to the public from

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International Monetary Fund

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© 2015 International Monetary Fund

Contents

CENTRAL AND EASTERN EUROPE:

NEW MEMBER STATES (NMS) POLICY FORUM, 2014

SELECTED ISSUES

February 26, 2015

Approved By

The European Department

Prepared by: John Bluedorn, Greetje Everaert, Nan Geng, Anna Ilyina, Plamen Iossifov, Jiri Podpiera, Jesmin Rahman, John Ralyea, Ara Stepanyan, Yan Sun, Johannes Wiegand, Jiae Yoo, Jessie Yang and Li Zeng. Min Song provided research assistance.

Contents

  • EURO ADOPTION—MACROECONOMIC BENEFITS AND CHALLENGES

  • A. European Integration and Euro Adoption

  • B. Advantages from Adopting the Euro

  • C. Advantages from Preserving Monetary Policy Autonomy and Exchange Rate Flexibility

  • D. The Impact of Euro Adoption on Macroeconomic Policy Frameworks

  • E. Conclusions

  • BOXES

  • 1. The 2004 IMF Study, and New Evidence on its Main Findings

  • 2. New Member States, Euro Adoption, and the Theory of Optimal Currency Areas

  • 3. Economic and Price Convergence in Emerging Europe

  • FIGURES

  • 1. Euro Premium, 2001-13

  • 2. New Member States: Monetary Policy, 2003-07

  • 3. New Member States: Monetary Policy, 2008-14

  • APPENDICES

  • I. Estimating the Euro Premium

  • II. The Index of Monetary Conditions

  • III. Model-Based Inflation Variance Decomposition

  • REFERENCES

  • OPTING INTO THE BANKING UNION BEFORE EURO ADOPTION

  • A. Why Did Europe Need a Banking Union?

  • B. Banking Union Modalities and What an Early “Opt-In” Entails

  • C. Banking Union Opt-In: Pros and Cons for Non-Euro EU Countries

  • D. Conclusions

  • BOXES

  • 1. Key Elements of the Euro Area Banking Union

  • 2. The SSM Modalities

  • 3. The SRM Modalities

  • 4. Macroprudential Policy Space for BU members

  • 5. Theoretical Considerations in Designing an Optiomal Banking Union

  • 6. Cross-Country Differences in Policymakers Relative Preference for Promoting Domestic Banks

  • TABLE

  • 1. Benefits and Costs of Joining Banking Union for Non-Euro Area Countries

  • APPENDIX

  • I. Largeset Banks in NMS-6 and their Ultimate Owners

  • REFERENCES

  • THE EU FISCAL FRAMEWORK AND PENSION REFORM

  • A. Public Pension Systems in New Member States: The Broad Picture

  • B. Pillar II Pension Schemes: History, Rationale, Performance

  • C. The EU Fiscal Framework and Pillar II Reversals

  • D. Conclusions

  • FIGURES

  • 1. Selected European Countries: Key Demographic Data

  • 2. Second Pension Pillars and National Savings

  • 3. Pillar II Pension Funds: Returns and Fees

  • 4. Pillar II Pension Reversals

  • TABLES

  • 1. Pension Spending Projections

  • 2. Net Present Value of Pension Deficits

  • 3. Treatment of Net Cost of Systemic Pension Reforms in the EU Fiscal Framework (the Stability and Growth Pact (SGP)

  • APPENDICES

  • I. Pension Systems in NMS-6 and Recent Pension Reforms

  • II. Evolution of Pillar II Systems and Contribution Rates

  • REFERENCES

  • MAKING THE MOST OF THE EU SINGLE MARKET

  • A. Introduction

  • B. Evolution of Exports to EU: Relative Success and its Determinants

  • C. Export Quality in NMS-6: Room for Growth

  • D. Services Exports: Scope for Further Increase

  • E. Policy Implications

  • BOX

  • 1. Czech Republic and Hungary: What can be learnt from Korea?

  • FIGURES

  • 1. NMS: Gross and Value Added Exports of Goods and Services

  • 2. Structural Factors: Relative Importance for Exports to the EU

  • 3. NMS-6: Contribution of Structural Factors to Relative Export Performance in the EU Market

  • 4. NMS-6: Export Quality and Room for Improvement

  • 5. NMS-6: Services Exports and Services Directive

  • TABLES

  • 1. Determinants of Value-Added Exports of Goods and Services to EU: NMS-10, 2003–11

  • 2. RCA: Exports on Professional and Technical Services

  • ANNEX

  • Data Appendix and Robustness Check for Regression Analysis for Export Integration

  • REFERENCES

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Central and Eastern Europe: New Member States (NMS) Policy Forum, 2014, Selected Issues Paper
Author:
International Monetary Fund. European Dept.