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The acceding countries’ strategies towards ERM II and the adoption of the euro: an analytical review

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  • Backé, Peter
  • Thimann, Christian
  • Arratibel, Olga
  • Calvo-Gonzalez, Oscar
  • Mehl, Arnaud
  • Nerlich, Carolin

Abstract

This paper reviews the strategies announced by the ten countries joining the European Union in May 2004 with regard to their intentions for participation in ERM II and the adoption of the euro. The paper examines the economic rationale of the monetary integration strategies declared by most acceding countries with a view to identifying also their potential risks. It does so by making use of several different approaches, including a short review of nominal convergence and a more extensive discussion from an optimum currency area perspective. An important part of the analysis is devoted to the implications of real convergence – i.e. catching-up growth in income and adjustment of the real economic structures towards those prevailing in the euro area – on the patterns of economic dynamics in acceding countries. Other aspects covered are the risks for external competitiveness in the convergence process and the appropriate pace of fiscal consolidation.

Suggested Citation

  • Backé, Peter & Thimann, Christian & Arratibel, Olga & Calvo-Gonzalez, Oscar & Mehl, Arnaud & Nerlich, Carolin, 2004. "The acceding countries’ strategies towards ERM II and the adoption of the euro: an analytical review," Occasional Paper Series 10, European Central Bank.
    • Handle: RePEc:ecb:ecbops:200410
    Note: 508510
    as

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    2. Paul De Grauwe & Gunther Schnabl, 2004. "Exchange Rate Regimes and Macroeconomic Stability in Central and Eastern Europe," CESifo Working Paper Series 1182, CESifo.
    3. Konstantins Benkovskis, 2006. "The Effect of Latvian Pension Reform on Savings and Government Budget," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 3-21, July.
    4. Bas Aarle & Harry Garretsen & Cindy Moons, 2008. "Accession to the euro-area: a stylized analysis using a NK model," International Economics and Economic Policy, Springer, vol. 5(1), pages 5-24, July.
    5. Fidrmuc, Jarko & Korhonen, Iikka, 2006. "Meta-analysis of the business cycle correlation between the euro area and the CEECs," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 518-537, September.
    6. Frenkel, Michael & Nickel, Christiane, 2005. "New European Union members on their way to adopting the Euro: An analysis of macroeconomic disturbances," Global Finance Journal, Elsevier, vol. 15(3), pages 303-320, February.
    7. Jurgita Jurgutyte, 2006. "Lithuania's Track to the Euro and the Endogeneity Hypothesis," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 53-69, July.
    8. António Afonso & Christiane Nickel & Philipp C. Rother, 2006. "Fiscal Consolidations in the Central and Eastern European Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 402-421, July.
    9. Olegs Tkacevs, 2006. "The Impact of Fiscal Policy on Prices: Does the Fiscal Theory of Price Level Matter in Latvia?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 23-36, July.
    10. Peter Backé & Elisabeth Beckmann, 2020. "What drives people’s expectations of euro adoption? – Evidence from the OeNB Euro Survey on selected CESEE countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/20, pages 57-79.
    11. Ignazio Angeloni & Michael Flad & Francesco Paolo Mongelli, 2005. "Economic and monetary integration of the new Member States - helping to chart the route," Occasional Paper Series 36, European Central Bank.
    12. Oldřich Dědek, 2006. "Rizika a výzvy měnové strategie k převzetí eura [Risks and challenges of monetary strategy for euro adoption]," Politická ekonomie, Prague University of Economics and Business, vol. 2006(1), pages 3-21.
    13. International Monetary Fund, 2007. "Euro Area Policies: Selected Issues," IMF Staff Country Reports 2007/259, International Monetary Fund.
    14. Larry Sawers, 2006. "Inequality and the Transition: Regional Development in Lithuania," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 37-51, July.
    15. Jollès, Maya & Meyermans, Eric & Vašíček, Bořek, 2023. "Determinants of macroeconomic resilience in the euro area: An empirical assessment of national policy levers," Economic Systems, Elsevier, vol. 47(3).
    16. International Monetary Fund, 2004. "Republic of Estonia: Selected Issues," IMF Staff Country Reports 2004/357, International Monetary Fund.
    17. Labrinidis, George, 2018. "The roots of the Euro," MPRA Paper 86560, University Library of Munich, Germany.
    18. Péter Halmai & Viktória Vásáry, 2012. "Convergence crisis: economic crisis and convergence in the European Union," International Economics and Economic Policy, Springer, vol. 9(3), pages 297-322, September.
    19. Peter Backé, 2009. "The Monetary Integration of CESEE EU Member States: Achievements and Prospects," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 5, pages 73-81.
    20. Schuknecht, Ludger & Martin, Reiner & Vansteenkiste, Isabel, 2007. "The role of the exchange rate for adjustment in boom and bust episodes," Working Paper Series 813, European Central Bank.
    21. Vit Barta, 2005. "Fulfilment of the Maastricht Inflation Criterion by the Czech Republic: Potential Costs and Policy Options," Research and Policy Notes 2005/04, Czech National Bank.
    22. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for the World (2007 Edition)," MPRA Paper 5879, University Library of Munich, Germany.

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    Keywords

    acceding countries; ERM II; euro;
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