Exchange Rate Regimes and Convergence Criteria for Accession Economies: The Case of Macedonia and Croatia

Abstract

The paper assesses the nominal convergence of Macedonia and Croatia towards the EU. As the two countries are in a process of European integration, both economies should converge to the EU economy, so that the accession to be smoother. One channel for faster nominal convergence is pegging the national currency to the euro. Macedonia does this for more than a decade (previously to the DM), whereas Croatia maintains managed float. The assessment is focused on the question how different monetary strategies achieve the nominal convergence in terms of the fulfilment of the Maastricht convergence criteria.