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The Timing of EU Expansion and the Real Exchange Rate

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  • P.A.D. Cavelaars
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    Abstract

    This paper analyses the impact of the timing of EU expansion on the real exchange rate between the accession countries' currencies and the euro. I ¯nd 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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    File URL: http://www.dnb.nl/binaries/sr089_tcm46-146866.pdf
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    Bibliographic Info

    Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 89.

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    Length: 32 pages
    Date of creation: 2003
    Date of revision:
    Handle: RePEc:dnb:staffs:89

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    Web page: http://www.dnb.nl/en/
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    Keywords: economic integration; real exchange rate; international trade; productivity shocks.;

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    1. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
    2. repec:fth:bfdipa:1/2000 is not listed on IDEAS
    3. International Monetary Fund, 2000. "Exchange Rate Regimes in Selected Advanced Transition Economies," IMF Policy Discussion Papers 00/3, International Monetary Fund.
    4. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1998. "How far is Eastern Europe from Brussels?," MPRA Paper 20059, University Library of Munich, Germany.
    5. Fabrizio Coricelli & Boštjan Jazbec, 2004. "Exchange Rate Arrangements in the Accession to the EMU," Comparative Economic Studies, Palgrave Macmillan, vol. 46(1), pages 4-22, March.
    6. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    7. Zoltán M. Jakab & Mihály András Kovács, 1999. "Determinants of Real Exchange Rate Fluctuations in Hungary," MNB Working Papers 1999/6, Magyar Nemzeti Bank (the central bank of Hungary).
    8. Arjan M. Lejour & Ruud A. de Mooij & Richard Nahuis, 2001. "EU Enlargement: Economic Implications for Countries and Industries," CESifo Working Paper Series 585, CESifo Group Munich.
    9. Daviddi, Renzo & Ilzkovitz, Fabienne, 1997. "The Eastern enlargement of the European Union: Major challenges for macro-economic policies and institutions of Central and East European countries," European Economic Review, Elsevier, vol. 41(3-5), pages 671-680, April.
    10. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    11. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
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