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Exchange Rate Regimes in Central, Eastern, and Southeastern Europe: A Euro Bloc and a Dollar Bloc?

Author

Listed:
  • Slavov, Slavi T.

    (International Monetary Fund)

Abstract

There are 13 countries in Central, Eastern, and Southeastern Europe (CESEE) with floating exchange rate regimes, de jure. This paper uses the framework pioneered by Frankel and Wei (1994) and extended in Frankel and Wei (2008) to show that most of them have been tracking either the euro or the US dollar in recent years. Eight countries, all of them current or aspiring EU members, track the euro. Of the five countries keying on the US dollar in various degrees, all but one belong to the Commonwealth of Independent States. The study shows that the extent to which each country’s currency tracks the euro (or the dollar) is correlated with the structure of its external trade and finance. However, some countries appear to track the euro or US dollar to an extent that appears inconsistent with inflation targeting, trade or financial integration, or the extent of business cycle synchronization. The phenomenon is particularly pronounced among the euro bloc countries in Emerging Europe, which may be deliberately gravitating around the euro in anticipation of eventually joining the euro area.

Suggested Citation

  • Slavov, Slavi T., 2019. "Exchange Rate Regimes in Central, Eastern, and Southeastern Europe: A Euro Bloc and a Dollar Bloc?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 34(3), pages 395-425.
    • Handle: RePEc:ris:integr:0776
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    Cited by:

    1. Radostin Neykov & Caroline Robert, 2021. "The Role of the Euro in the Eastern Partnership Countries," European Economy - Discussion Papers 138, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Thorvaldur Gylfason & Eduard Hochreiter, 2023. "To Grow or Not to Grow: Belarus and Lithuania," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(1), pages 137-167, March.
    3. Martin Feldkircher & Helene Schuberth, 2023. "Understanding Monetary Spillovers in Highly Integrated Regions: The Case of Europe," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(4), pages 859-893, August.

    More about this item

    Keywords

    Central; Eastern and Southeastern Europe; Exchange rate regimes; Fixed versus floating; De jure versus De facto;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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