Abstract
This chapter assesses the degree of readiness of Romania to adopt euro mainly based on the optimal currency area (OCA) criteria. Our findings suggest that the correlation of the business cycle in the case of Romania is one of the lowest among the new member states (NMS), although it has increased in the last few years. Also, using a structural VAR approach, we estimated the similarity between demand and supply shocks between NMS and the eurozone, showing that the demand shocks are still negatively correlated with eurozone for some NMS, including Romania. The main conclusion of our chapter is that Romania, as well as some other NMS countries, still needs time to progress on the real convergence criteria in order to adopt euro without major costs.
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