Adoption Of Euro Research Articles

Romania and the monetary union: An example for emerging countries

The European and world economy have taken a serious downturn in recent years. The European Union and the Euro-area have been challenged by the enlargement process, by diversity as a central feature of the group, and also by the economic and financial crisis. Romania, the EU 7th largest member state, under the effects of the “no opt-out” clause, will be facing, rather soon, the Euro adoption as a new challenge along with all its implications. This has become an even greater challenge due to recent evolutions in Greece, Ireland, Portugal or Italy. Beyond the simple member status, or the enlargement of the Euro-Area, foreseeing the future of the European single currency – the Euro raises serious questions around the real convergence process and its interaction with the actual crises. The optimal currency area (OCA) convergence frequently emerges as the missing puzzle piece in a functional monetary union system. This paper wishes to accomplish a brief evaluation of Romania’s real convergence in respect to the Euro-zone. But this is not the only issue raised here. Apart from that, in accurately quantifying real convergence we must focus on the most enhancing, relevant and suitable set of indicators for the real convergence, as the literature has not yet imposed a single set as universal or at least as generally agreed upon. In assessing real convergence as a clear aim for Romania on a medium term perspective, this paper envisages applying the optimal currency area theory. Convergent evolution may be influenced by several factors showing the evolution of the main disparities in the compared economies. Taking this into account, we shall also compute the variation coefficient of the GDP per capita or the σ-convergence as an expression of the dispersion of this indicator. Key words: Real-convergence, Euro, optimal currency area, Romania.

Perspectives on Euro introduction in the Romanian economy

This paper offers a first quantitative glance at the possible effects of preparing for Euro adoption, as well as at the ex-post effects of actual adoption. Although the complexity of the models considered gradually increases, nevertheless all the simulations provide the same general picture in which (short and sometimes medium term) restrictiveness is revealed. The results show that for Romania, fulfilling the Maastricht criteria implies short-term economic slowdown and restrictiveness, followed by economic recovery and growth in the medium term and especially the long run. Quantitative estimates of these effects are provided. The most important negative evolutions are to be found for the labour market and investment.

Einige Kritische Betrachtungen Zu Neuesten Entwicklungen in Der Estnischen Wirtschaftspolitik (Some Critical Remarks to the Last Developments of Estonian Economic Policy)

The paper contains a brief treatment of the economic crisis in Estonia, associating it critically with the general economic situation and reasons. The issues of unemployment, increase in prices and several other important areas are under review. Adoption of euro and the price dynamics in Estonia are treated separately. In the opinion of the author the price increases are not caused by the euro but by the greed for profits and irresponsibility of businesses and traders. National institutions do not view economic policy as an integrated activity either but rather see it as behaviour and choices appropriate for a particular political party. Situation in quite a few areas is critically evaluated, including the activities of the Estonian political parties in power. Organization of the recent elections of the Estonian Riigikogu (Parliament) is evaluated and suggestions are made both for improvement of the organization of elections in the spirit of democracy and for the related needs for further development of the Estonian national economy.

Measuring the trade effects of the euro in Central and Eastern Europe

We study trade effects of the euro adoption in Central and Eastern Europe (CEE). We employ a gravity model that controls for an extended set of trade theory and policy variables. The gravity model is estimated using the panel data approach on a sample of Organisation for Economic Co-operation and Development (OECD) and CEE countries trading with the rest of the world during the period 1993–2008. We find that the adoption of the euro results in trade expansion for the CEE countries. This result is driven by elimination of exchange rate volatility and accession to the European Economic and Monetary Union (EMU). However, our forecasts show that this effect is short-lived.

DEJAVNIKI SPREMINJANJA AGROŽIVILSKIH CEN V SLOVENIJI

This paper investigates the impacts of the current economic developments, the Euro adoption, and input prices on the consumer food prices. The focus of the analysis is on the consumer food price developments during the Slovenian adjustments towards the European Union membership, the Euro adoption by the followed increased in consumer prices, and the current economic and financial conditions. The empirical analysis on the determinants of the consumer food prices is based on the monthly statistical data, which were obtained from the Statistical Office of Republic of Slovenia. We use three statistical methods of the analyses on the time-series data: principal component analysis, regression analysis, and linear trend analysis. We found that the Euro adoption had only short-term impact on the consumer food prices. The rise in the consumer food prices has been determined by the intermediary costs and the agricultural producers` prices.

Greece: Request for Extended Arrangement Under the Extended Fund Facility - Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Greece.: Request for Extended Arrangement Under the Extended Fund Facility: Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Greece.

This paper presents the staff report for Greece’s request for an Extended Arrangement under the Extended Fund Facility. The Greek economy fell into deep twin structural deficits after euro adoption. Easy access to financing at low interest rates fuelled rapid borrowing by the private and public sectors. Between euro accession in 2001 and 2009, private sector credit almost doubled in percent of GDP, financed mainly through the domestic banking system. Massive sovereign borrowing from international bond markets pushed government debt from 100 percent of GDP to about 130 percent of GDP during this timeframe.

Exchange Rate Regimes and Economic Growth in Central and Eastern European Countries

One of the questions that have not received a clear answer by academics yet is if the exchange rate regime choice could influence the economic growth. The success of the stabilization programs based on exchange rates, the pegged exchange rate arrangements brake up in some emerging countries, the current difficulties in the Euro zone show why this topic is still controversial and important. We used OLS and GMM methods to estimate a growth model with dummy variables that isolate the effect of exchange rate regimes on economic growth. The research has been employed on 16 Central and Eastern European countries, where the exchange rate arrangement choice is a key point in the years before Euro adoption. We got statistically significant coefficients for the regime dummy variables, independently of the estimation method. Our results suggest superior effect on economic growth of the floating and intermediate regimes comparing to the fixed arrangements. Although the exchange rate stability is commonly viewed as stimulation for economic growth, it seems that it doesn’t support growth if it was obtained by massive interventions of the monetary authorities to support the exchange rate level. Our surprising result does not explain why a major part of the selected countries adopted hard pegs, although the flexible regimes apparently stimulate growth. It is possible that currency boards are not suitable for long periods of time, but just for a quick economic.

Rice Developments in the Hospitality Industry in Slovenia

This paper focuses on the determinants of the hospitality industry price developments, which is based on the time-series seasonally unadjusted monthly statistical data from January 2000 to September 2010. By using the principal component analyses, the two common components of the hospitality industry price behaviours are identified: the general level of prices and the bipolar component of demand for services in hospitality industry.The econometric tests confirmed that the nonstationary sequences in time-series data are integrated of the same order and the residuals contain a stochastic trend. The first difference is stationary. The results indicate that the hospitality industry prices are significantly positively associated with domestic consumer prices and hospitality industry prices in the euro zone. The regression equation in the first differences also confirmed that the hospitality industry prices are significantly negatively associated with the fuel prices and with the dummy variable, which captures the time period after the Euro adoption in Slovenia in 2007.

Republic of Latvia: Fifth Review Under the Stand-By Arrangement and Financing Assurances Review, Request for Waiver of Nonobservance of a Performance Criterion, and Proposal for Post-program Monitoring

Latvia’s economy continues to recover, but the worsening global outlook is likely to hurt growth. Implementation of the program has made the economy more robust to shocks, but risks remain that could derail the recovery and the goal of euro adoption. Spillovers from the euro area crisis could increase—reducing growth and increasing capital outflows—and complicate plans to tap international capital markets. The authorities’ macroeconomic strategy has centered on substantial wage and price cuts and productivity growth to improve competitiveness and reduce external imbalances.

Costs and benefits of Euro adoption in Slovakia

W niniejszym opracowaniu przedstawiono historię wejścia Słowacji do strefy Euro. Przeanalizowano pierwsze efekty z przyjęcia nowej waluty na podstawie najnowszych danych z gospodarki. Celem badania było przedsyskutowanie spodziewanych korzyści, jak np. elimiacja ryzyka kursowego, spadek kosztów transakcyjnych, stabilność cen, wzrost wymiany handlowej i poprawa wiarygodności kredytowej. Te efekty oczekiwane dzięki przyjęciu euro zostały skonforntowane z bieżacymi danymi z rynku. Ostatecznie postawiona została hipoteza, mówiąca, że pozytywne efekty z przyjęcia nowej waluty są głównie skutkiem tego, że Słowacja jest małym krajem. Metodologia użyta w niniejszym opracowaniu oparta jest przede wszystkim na krytycznym przeglądzie literaturowym najnowszych publikacji.

THE EUROIZATION OF LITHUANIA AND POLAND: A COMPARISON

Usually, euroization is connected with the necessity of passing through not easy to fulfil and to maintain the Maastricht Treaty criteria and to accept (à) priori a definite course of resigning from the national currency. Upon fulfilling the required adjustment periods of euro adoption, the European law forces a total departure from the national currency. This process is subjected to a solid supervision and control of the EU organs. Additionally, the Maastricht Treaty obliges to introduce the euro when a country is in a good economic condition, confirmed by the fulfilment of nominal convergence criteria. In such a situation, the common currency adoption must be (or should be) always interpreted as a proof of a stable economic development and abilities of keeping such parameters in the future. However, in case of euroization accomplished with omission (or even with infringing) the Treaty, there is no necessity of complementing any European law duties, and especially there is no obligation of totally resigning the national currency. Such kind of euro adoption means not a full but a partial euroization, which can appear in a very difficult situation in country`s economy or when currency independence is not safe and profitable. Resignation from the national currency is like an act of desperation, or at least it is forced by the lack of the abilities to manage the economic problems. The purpose of this publication is to show euroization as state (partly also as process), particularly on the examples of Lithuania and Poland. It obviously it does not seem new, but many changes in the world economy (with special regard to the crisis hurting the European Union) and the lower enthusiasm for joining the Euroland (euro zone) show the need to consider such a problem.

The Study of Nominal Convergence in European Union

The main idea of fulfilling all convergence criteria when a country wants to adopt euro is to ensure that only the Member States that have the adequate economic conditions to maintain the price stability and the coherence of the euro area can be a part of Euro Zone. As a result, today, the individual criteria are interpreted and applied in a strict manner. Unfortunately for the Euro Zone, at the beginning of EMU, the Maastricht criteria were not applied so strictly. On the other side, many countries that are using now the euro as their currency are not fulfilling all the criteria. Starting from these controversies, the main objectives of our paper are to study the degree of fulfillment of convergence criteria in the moment of euro adoption for the 17 countries that are using today the European currency and to assess the evolution of nominal convergence during the time span 1995 – 2011.

Poland on the Road to the Euro: How Serious is the Risk of Boom-Bust Cycles after the Euro Adoption? An Empirical Analysis

The goal of this paper is, firstly, to determine which structural characteristics of an economy make it more (or less) prone to macroeconomic booms and busts and, secondly, to empirically assess the risk of a boom-bust cycle in Poland after the euro adoption. We start from identifying booms and busts in private consumption and investment in fourteen 'old' EU member states and then we seek to explain the identified boom and bust series using panel probit and pooled probit models. We then use the estimated equations to assess the probability of booms and busts in Poland over the period 2004 to 2009. Our results suggest that credit developments have been the most important driving force of booms and busts in EU-14. The relevance of international capital flows as a boom-bust transmission channel and of the cyclical heterogeneity of countries which undergo a process of monetary integration is also confirmed. We also find evidence that the fiscal channel boils down to a crowding-out effect: a reduction in the general government expenditure 'makes room' for a boom in the private expenditure, and the reverse holds for busts. In turn, our results for Poland are inconclusive, which probably means that the models estimated for EU-14 are not adequate to predict the probabilities of booms and busts in this country.

Strategie vstupu České republiky do kursového mechanismu ERM II

Předložená stať se zabývá posouzením možných rizik vstupu ČR do kursového mechanismu ERM II, a to jednak na základě zhodnocení samotného mechanismu ERM II a také na základě zkušeností jiných zemí, které jím prošly, anebo v něm setrvávají. Stať je rozdělena do třech částí. První je věnována komparaci kursového mechanismu ERM II s kursovým mechanismem EMS a interpretaci plnění kriteria kursového stability Komisí ES a Evropskou centrální bankou. Ve druhé části jsou popsány zkušenosti dvou zemí s účastí v ERM II. Pro tyto účely bylo zvoleno Dánsko, které setrvává v kursovém mechanismu od samého počátku jeho fungování a Slovensko, které bylo v ERM II zapojeno pouze po nezbytnou dobu před přijetím eura. Třetí část hodnotí možná rizika vstupu ČR do ERM II.

Dating Capital Market Integration In The EMU

This paper analyzes the effect of the Euro on structural breaks in financial market variables in a sample of three EMU (France, Germany, Netherlands) and two non-EMU (U.K. and Switzerland) countries from March 1984 to November 2002. We identify two dates when integration-related structural breaks occurred in European asset pricing; the first in 1986 affected all sample countries whereas the second in 2000 affected only the EMU countries and could be attributed to the adoption of Euro in 1999.

The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland

There are many issues associated with the Eurozone accession of Poland. The goal of this paper is to analyse one, but very important aspect, namely – the macroeconomic impact of the loss of autonomous monetary policy. In order to answer this question, we build a two country DSGE model with sticky prices. We begin by evaluating the performance of our model. Next, we investigate how joining the Eurozone will affect the business cycle behaviour of the main macroeconomic variables in Poland. We find that the Euro adoption will have a noticeable impact on the Polish economic fluctuations. In particular, the volatility of domestic output increases and the volatility of inflation decreases. Also, in order to quantify the effect of the Euro adoption, we compute the welfare effect of this monetary policy change. Our findings suggest that the welfare cost is not large.

THE IMPACT OF THE EURO ADOPTION ON NASDAQ OM X BALTIC STOCK EXCHANGE. ANALYSIS BY STRUCTURAL BREAK TESTS

Although the euro adoption in Estonia in 2011 and changing the trading and clearing currency at the NASDAQ OMX Vilnius for euro on 22 November 2010 were foreseen as a possibility to attract more foreign investors, last year the Baltic stock exchange underwent some extreme fluctuations, both positive and negative.In this paper, shown are statistically significant euro adoption-caused trend breaks underlying the data set of NASDAQ OMX stock exchanges in Tallinn and Vilnius. Also, the possible factors that may have been driving them are discussed. The assessment is carried out using three different structural break tests.

What Might Central Banks Lose or Gain in Case of Euro Adoption - A GARCH Analysis of Money Market Rates for Sweden, Denmark and the UK

Der Beitrag befasst sich mit der Frage, ob die Zentralbanken Schwedens, Danemarks und des Verinigten Konigreichs kurzfristig ihre jeweiligen Geldmarktsatze beeinflussen konnen und folglich bei einer Einfuhrung des Euro anstelle ihrer nationalen Wahrungen diesen Einfluss verlieren wurden. Mit Hilfe eines GARCH-M-GED-Modells mit taglichen Zinsdaten wird dies fur den Zeitraum von 1992 bis 2011 uberpruft. Als Referenzzins dient hierbei der Euribor. Die Ergebnisse zeigen eine gleichgerichtete Entwicklung zwischen dem Euribor und den nationalen Drei-Monats-Geldmarktsatzen in den untersuchten Landern an. Diese gleichgerichtete Bewegung kann in dem Sinne interpretiert werden, dass die jeweiligen Zentralbanken nur einen geringen Einfluss auf die Entwicklung der Geldmarktzinsen in ihren Landern haben. Es ist nicht auszuschliesen, dass dieses Argument jedoch nur fur 'ruhige Zeiten' an den Finanzmarkten gilt. Deshalb liegt ein Augenmerk der Untersuchung auf Zeiten mit betrachtlichen Turbulenzen in den Markten. Die Ergebnisse zeigen, dass die Politik der Europaischen Zentralbank (EZB) einen betrachtlichen Einfluss auf die Entwicklung der drei Geldmarktsatze ausubt. Zusatzlich zeigen die Ergebnisse des GARCH-M-GED Modells eine im Vergleich zum Euroraum unterschiedliche Risikoentwicklung und instabile Volatilitaten des Risikos, wenn Schweden und Danemark negativen monetaren Schocks gegenuberstehen. Der Beitrag endet mit der Schlussfolgerung, dass sich diese beide Staaten gegenuber negativen monetaren Schocks nicht durch eine gemeinsame Geldpolitik schutzen konnen und es somit aus Sicht der skandinavischen Lander rational sein kann, der Eurozone nicht beizutreten.

The Euro and Structural Reforms*

This paper investigates whether or not the adoption of the Euro has facilitated the introduction of structural reforms, defined as deregulation in the product markets and liberalization and deregulation in the labor markets. After reviewing the theoretical arguments that may link the adoption of the Euro and structural reforms, we investigate the empirical evidence. We find that the adoption of the Euro has been associated with an acceleration of the pace of structural reforms in the product market. The adoption of the Euro does not seem to have accelerated labor market reforms in the primary labor market; however, the run up to the Euro adoption seems to have been accompanied by wage moderation. We also investigate issues concerning the sequencing of goods and labor market reforms.

The Euro and Structural Reforms

This paper investigates whether or not the adoption of the Euro has facilitated the introduction of structural reforms, defined as deregulation in the product markets and liberalization and deregulation in the labor markets. After reviewing the theoretical arguments that may link the adoption of the Euro and structural reforms, we investigate the empirical evidence. We find that the adoption of the Euro has been associated with an acceleration of the pace of structural reforms in the product market. The adoption of the Euro does not seem to have accelerated labor market reforms in the "primary labor market;" however, the run up to the Euro adoption seems to have been accompanied by wage moderation. We also investigate issues concerning the sequencing of goods and labor market reforms.