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EMU Enlargement: Which Concept of Convergence to Apply?

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Author Info
Andreas Freytag () (University of Jena, Faculty of Economics)

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Abstract

The EU-enlargement in mid-2004 will probably be followed by the accession to the European Monetary and Economic Union (EMU), depending on the individual state of convergence of the accession candidates. As a political rather than an economic decision on EMU enlargement is not beyond imagination, we argue that institutional convergence, in particular central bank independence (CBI), is equally - if not more - important for a successful common monetary policy in Euroland than nominal and real convergence, as it indicates an appropriate policy assignment and thereby fosters real and nominal convergence. The paper starts with an assessment of the state of convergence of CEE countries in nominal and real terms. Based on a constitutional political economy framework and the additional requirement for future EMU members to give their central banks an independent status, we then assess the degree of central bank independence in CEE. We apply a measure, namely the index of monetary commitment, which includes external criteria such as convertibility and exchange rate regimes. It can be shown that the degree of central bank independence in CEE countries is considerably high; however, there is a gap to the ECB's independence with respect to external aspects of CBI.

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Paper provided by Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät in its series Jenaer Schriften zur Wirtschaftswissenschaft with number 11/2004.

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Date of creation: Jun 2004
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Handle: RePEc:jen:jenasw:2004-11

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Related research
Keywords: Convergence; Central Bank Independence; EMU Enlargement;

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Find related papers by JEL classification:
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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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.)

  1. Andreas Freytag & Klaus Winkler, 2004. "The Economics of Self-regulation in telecommunications under sunset legislation," Jenaer Schriften zur Wirtschaftswissenschaft 17/2004, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
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