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The Euro Marriage

In: New Trends in Finance and Accounting

Author

Listed:
  • Aleš Michl

    (University of Economics, Prague)

Abstract

Is a monetary union advantageous? This analysis proposes an approach to the issue from the vantage point of a small open economy, namely the Czech Republic. Is it sensible for the Czech economy to participate in a monetary union like the EMU? What criteria can we apply to find out? To assess the advantages of joining a monetary union, it is recommended to analyse, instead of the Maastricht criteria, five new criteria that reflect the change in the competitiveness of a country. (1) How do import prices respond to a weaker exchange rate? (2) How do export prices respond to a weaker exchange rate? (3) How does domestic inflation respond to a weaker exchange rate? (4) How do wage costs in firms respond to a weaker exchange rate? (5) How do GDP and employment respond to a weaker exchange rate? Only when a weakening or devaluation of the currency is not beneficial to competitiveness, only then should a country with small open economy consider an entry into a monetary union (like the EMU).

Suggested Citation

  • Aleš Michl, 2017. "The Euro Marriage," Springer Proceedings in Business and Economics, in: David Procházka (ed.), New Trends in Finance and Accounting, chapter 0, pages 1-15, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-49559-0_1
    DOI: 10.1007/978-3-319-49559-0_1
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