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Exchange Rate Mechanism (Erm 2): Estonia Case Study

Author

Listed:
  • Tomislav Coric

    (University of Zagreb)

  • Maja Mesic

Abstract

Exchange rate mechanism 2 (ERM 2) may be considered as the final stage in the implementation of optimal currency area theory. Successful participation in ERM 2 and the possibility to become a Euro zone member are closely connected to fulfilment of nominal and real convergence criteria. ERM 2 phase in Estonia is characterized by low interest rates, fiscal and exchange rate stability, but relatively high inflation. The analysis of economic indicators shows real convergence while participating in the ERM 2, which is similar to other participant countries. However, country’s economic growth is followed by intensive growth of external debt.

Suggested Citation

  • Tomislav Coric & Maja Mesic, 2012. "Exchange Rate Mechanism (Erm 2): Estonia Case Study," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 21(2), pages 621-638, december.
    • Handle: RePEc:avo:emipdu:v:21:y:2012:i:2:p:621-638
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    More about this item

    Keywords

    ERM 2; Estonia; convergence;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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