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A New EU Member Country on the Road to the Euro Area: Monetary and Fiscal Policies for Slovenia

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  • Klaus Weyerstrass
  • Reinhard Neck

Abstract

Slovenia was the first of the ten new EU member states to enter the Euro Area on January 1, 2007. It was an explicit objective of Slovenian policy-makers to introduce the euro as early as possible. Slovenia was participating in the exchange rate mechanism ERM-II since June 2004. This paper analyses whether the choice of participating in the ERM-II soon after EU accession was the best strategy in terms of the macroeconomic performance. It is shown that a better overall economic performance could have been achieved under a crawling peg regime allowing a depreciation of the Slovenian tolar (SIT) before introducing the euro in 2007. The worst policy results are obtained when the exchange rate is totally fixed at an early stage of EMU integration. The labor market performance can be significantly improved by cutting income taxes and social security contribution rates. Copyright International Atlantic Economic Society 2007

Suggested Citation

  • Klaus Weyerstrass & Reinhard Neck, 2007. "A New EU Member Country on the Road to the Euro Area: Monetary and Fiscal Policies for Slovenia," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(4), pages 431-449, December.
    • Handle: RePEc:kap:atlecj:v:35:y:2007:i:4:p:431-449
    DOI: 10.1007/s11293-007-9083-9
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    References listed on IDEAS

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    1. Klaus Weyerstrass & Gottfried Haber & Reinhard Neck, 2001. "SLOPOL1: A macroeconomic model for Slovenia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(1), pages 20-37, February.
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    Cited by:

    1. Klaus Weyerstrass & Reinhard Neck, 2008. "Macroeconomic Consequences of the Adoption of the Euro: The Case of Slovenia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(1), pages 1-10, February.
    2. repec:kap:iaecre:v:14:y:2008:i:1:p:1-10 is not listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; Monetary policy; Macroeconometric model; Slovenia; E40; E62;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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