Optimum Currency Area Indices - How Close is the Czech Republic to the Eurozone?
AbstractIn this paper we provide a survey of the optimum currency area theory, estimate the degree of the explanatory power of the optimum currency area criteria, and also calculate the optimum currency area index in the case of the Czech Republic. The results indicate that the traditional optimum currency area criteria to certain extent explain exchange rate variability. Our results may be interpreted as an attempt to assess the benefit-cost ratio of implementing a common currency for a pair of countries. Our results also suggest that from the point of view of the optimum currency area theory the costs of adopting the euro for the Czech Republic may be relatively low, at least in comparison with other EMU member countries. We conclude that if the European Monetary Union is sustainable, the accession of the Czech Republic should not change it.
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Bibliographic InfoPaper provided by Czech National Bank, Research Department in its series Working Papers with number 2003/10.
Date of creation: Dec 2003
Date of revision:
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Convergence; EU/eurozone; exchange rate; optimum currency area theory; transition.;
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
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-IFN-2005-04-16 (International Finance)
- NEP-MAC-2005-04-16 (Macroeconomics)
- NEP-MON-2005-04-16 (Monetary Economics)
- NEP-TRA-2005-04-16 (Transition Economics)
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.:
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- Roman Horváth & Zuzana Kuèerová, 2005. "Real Exchange Rates and Optimum Currency Areas: Evidence from Developed Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(5-6), pages 253-266, May.
- Horváth, Roman & Komárek, Luboš, 2003. "OPTIMUM CURRENCY AREA INDICES : EVIDENCE FROM THE 1990s," The Warwick Economics Research Paper Series (TWERPS) 665, University of Warwick, Department of Economics.
- Korhonen, Iikka, 2001.
"Some empirical tests on the integration of economic activity between the Euro area and the accession countries,"
BOFIT Discussion Papers
9/2001, Bank of Finland, Institute for Economies in Transition.
- Iikka Korhonen, 2003. "Some empirical tests on the integration of economic activity between the euro area and the accession countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(1), pages 177-196, March.
- Iikka Korhonen, 2002. "Some empirical tests on the integration of economic activity between the euro area and the accession countries," Macroeconomics 0209006, EconWPA.
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