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An Assessment Of The Effects Of The Currency Regime Change Shock On The External Equilibrium Of Some New European Union Member States

Author

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  • CAMELIA MILEA

    (“Victor Slavescu” Centre for Financial and Monetary Research, Bucharest)

  • ADINA CRISTE

    (“Victor Slavescu” Centre for Financial and Monetary Research, Bucharest)

Abstract

In the context of globalization and regionalization, we consider to be important an analysis of the asymmetries from the balances of payments of the member states of the European Union (EU). The propagation of a shock determines different effects in the member states of the European Union, due to the existence of some heterogeneous elements in the structure of these economies. Such a situation implies the risk of occurrence of divergences between the member states regarding the joint decisions with impact on the economic development and the external equilibrium. The article aims at providing a theoretical analysis of the way a shock considered by the authors as being representative affects the current account balance of some countries with different economic characteristics, at least in terms of the foreign exchange regime. The theoretical analysis is followed by an empirical analysis of two European Union countries that have undergone the shock of the exchange rate regime shift generated by the entry into ERM II (Exchange Rate Mechanism II). Our research aims at showing the way in which this shock has been reflected upon the balance of the current account, and if the change of the exchange rate regime has been beneficial or not for the economies analysed. The article is based on wider research studies concerning the matters of external equilibrium, asymmetric shocks and European integration, and which have been developed by the authors during the last three years.

Suggested Citation

  • Camelia Milea & Adina Criste, 2014. "An Assessment Of The Effects Of The Currency Regime Change Shock On The External Equilibrium Of Some New European Union Member States," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 103-107, February.
    • Handle: RePEc:cbu:jrnlec:y:2014:v:1:p:103-107
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    References listed on IDEAS

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    1. Mr. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers 1996/058, International Monetary Fund.
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    6. Farrant, Katie & Peersman, Gert, 2006. "Is the Exchange Rate a Shock Absorber or a Source of Shocks? New Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 939-961, June.
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