The subject matter of this paper is the design of appropriate Central Banking arrangements and exchange rate regimes for those former centrally planned Central and East European countries that are candidates for full membership in the European Union. We give an overview of the existing arrangements and point out to which extent monetary arrangements are restricted by conditions for entry both into the European Union and eventually into the European Monetary Union. Furthermore we investigate to which degree countries are fulfilling the accession criteria and compare their performance with the performance of earlier EU joiners like the countries of the Iberian Peninsula, Ireland and Greece. After concluding that the accession criteria do not necessarily favour a particular monetary regime, we analyse the pros and cons of the two regimes widely believed to be most stable- currency boards and inflation targeting. We find that under either regime tensions are likely to arise from the attempt to meet the accession criteria of a low inflation rate and a stable exchange rate. Due to likely large productivity gains in the traded goods sector the real exchange rate can be expected to display a trend real appreciation. Thus a currency board arrangement may well fail to produce an inflation rate below the Maastricht ceiling, unless the economy is run with a wasteful amount of spare capacity. Similarly the credibility of any inflation target would be undermined by the requirement that the exchange rate be kept within a specified target zone. This conflict could be resolved if the inflation ceiling was re-specified in terms of traded goods price inflation (and preferable in terms of ' core' traded goods price inflation) but this would require a change in the Maastricht Treaty.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF This book is provided by SUERF - The European Money and Finance Forum in its series SUERF Studies with number
11 and published in 2001.
Find related papers by JEL classification: E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy F15 - International Economics - - Trade - - - Economic Integration F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)