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Is Ready Romania For Euro Adoption? From Structural Convergence To Business Cycle Synchronization

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  • Marinas Marius - Corneliu

    (Academia de Studii Economice Bucuresti, Economie)

  • Socol Cristian
  • Socol Aura - Gabriela

Abstract

The objective of this study is to identify gaps between economic and commercial structures between Romania and the euro area and to explain whether the results obtained justify recently decision to delay euro adoption beyond 2015. According to theory of optimum currency areas, the existence of similar economic structures, increasing trade integration and synchronization of business cycles with monetary union will provide greater symmetry of shocks between Romania and the euro area. If the shocks are more symmetrical, then common monetary policy of the European Central Bank will act as a tool to neutralize the shocks in the case of Romania, and the euro adoption would have fewer adverse effects. To meet the research objective, we have structured this paper into three parts. In the first part we referred to the importance of the proposed theme in the economic literature. In the second part, we used several statistical methods to identify how divergent is Romania relative to the euro area economies. The results obtained show increasing divergence between economic structures until 2009 year using the NACE 6 methodology. In fact, Romania has the most divergent structure in EU-27 countries, being characterized by lowest contribution of services to GDP. However, structural differences do not constitute an obstacle to euro adoption, as long as Romania becomes more commercially integrated with other European countries. Thus, Romania is the seventh economy in terms of trade with the EU-27 (73.3% of exports and 74.3% of imports), and the degree of convergence between the structure of exports and imports have increased significantly compared with 2000 year. In the third part, we estimated the degree of synchronization of business cycles between Romania and the euro area, based on Hodrick-Prescott filter. Results showed an increasing correlation of business cycles as a result of increasing industrial activity and export synchronization.

Suggested Citation

  • Marinas Marius - Corneliu & Socol Cristian & Socol Aura - Gabriela, 2011. "Is Ready Romania For Euro Adoption? From Structural Convergence To Business Cycle Synchronization," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 181-186, December.
    • Handle: RePEc:ora:journl:v:1:y:2011:i:2:p:181-186
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    File URL: http://anale.steconomiceuoradea.ro/volume/2011/n2/023.pdf
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    References listed on IDEAS

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    1. Torres,Francisco & Giavazzi,Francesco (ed.), 1993. "Adjustment and Growth in the European Monetary Union," Cambridge Books, Cambridge University Press, number 9780521440196.
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    Cited by:

    1. Alina Georgeta Ailinca & Camelia Milea, 2015. "Reasons for and against the Early Adoption of the Euro in Romania," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(5), pages 56-66, October.

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    More about this item

    Keywords

    euro area; sectoral divergence; business cycle synchronization; Krugman index; Hodrick-Prescott filter;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration

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