The Timing of EU Expansion and the Real Exchange Rate
AbstractThis paper employs a dynamic Ricardian model to analyse the impact of the timing of EU expansion on the real exchange rate between the accession countries' currencies and the euro. I find that the real exchange rate response to EU accession is smaller in the case of a postponed accession, as postponement gives the regions more time to converge. However, early EU accession would contribute to reducing the real exchange rate response to asymmetric productivity shocks, as increased bilateral trade reduces the size of the non-tradable goods sector, making the real exchange rate less sensitive to productivity shocks.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2002-3.
Date of creation: May 2002
Date of revision:
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-08-17 (All new papers)
- NEP-CBA-2003-08-17 (Central Banking)
- NEP-EEC-2003-08-17 (European Economics)
- NEP-IFN-2003-08-17 (International Finance)
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