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Costs and Benefits of Euro Adoption in Bulgaria

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  • Georgy Ganev

Abstract

This study presents a cost-benefit analysis of euro adoption for the case of Bulgaria. Based on a review of existing similar studies for other East European EU member states, it outlines the basic types of potential costs and benefits of euro adoption, and applies them to the specific Bulgarian economic and economic policy context. The most important relevant features of the Bulgarian economy with respect to the analysis are found to be the catching-up status of the country and the currency board arrangement. In this context the study finds that a net benefit of above 15 % of GDP in a 20 year horizon can be expected for Bulgaria due mainly to enhanced capital inflows and to a smaller extent to a boost in trade with the EU and to higher domestic saving in light of enhanced policy credibility. Along the way the study attempts to draw attention to important nuances which may be of relevance for the analysis of euro adoption in Eastern Europe in general.

Suggested Citation

  • Georgy Ganev, 2009. "Costs and Benefits of Euro Adoption in Bulgaria," Working Paper / FINESS 5.3, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwfin:diwfin5.3
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.412906.de/diw_finess_05030.pdf
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    References listed on IDEAS

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    1. Meredith J. Beechey & Benjamin K. Johannsen & Andrew T. Levin, 2011. "Are Long-Run Inflation Expectations Anchored More Firmly in the Euro Area Than in the United States?," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 104-129, April.
    2. Andrew K. Rose & T. D. Stanley, 2005. "A Meta‐Analysis of the Effect of Common Currencies on International Trade," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 347-365, July.
    3. Felix Hüfner & Isabell Koske, 2008. "The Euro Changeover in the Slovak Republic: Implications for Inflation and Interest Rates," OECD Economics Department Working Papers 632, OECD Publishing.
    4. Eichengreen, Barry & Steiner, Katharina, 2008. "Is Poland at Risk of a Boom-and-Bust Cycle in the Run-Up to Euro Adoption?," CEPR Discussion Papers 7027, C.E.P.R. Discussion Papers.
    5. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 08-45.
    6. Vassil Tzanov, 2007. "Assessments of the Flexibility of the Labour Market in Bulgaria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-23.
    7. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
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    Cited by:

    1. Alfred Sitz & Aneliya Adzhemova & Atanas Pekanov, 2013. "Bulgarien: wirtschaftspolitische Strategie und ökonomische Entwicklung seit der Öffnung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 39(1), pages 69-85.
    2. repec:clr:wugarc:y:2013:v:39i:1p:69 is not listed on IDEAS
    3. Nadya Yorgova, 2011. "Impacts of and experience with EU membership of the countries of Central, Eastern and South - Eastern Europe. Country study on Bulgaria," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 2, pages 169-188, December.
    4. Cristian Păun, 2016. "The Adoption Of Euro In Case Of Romania: The Main (Counter) Arguments," Review of Social and Economic Issues, Romanian-American University, vol. 1(3), pages 76-94, march.

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    More about this item

    Keywords

    Bulgaria; euro area; euro adoption; cost-benefit analysis;
    All these keywords.

    JEL classification:

    • 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
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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