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EMU Enlargement: Which Concept of Convergence to Apply?

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  • Andreas Freytag

    ()
    (University of Jena, Faculty of Economics)

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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Bibliographic Info

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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Citations

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Cited by:
  1. Leo Wangler & Juan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2013. "The political economy of international environmental agreements: a survey," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(3), pages 387-403, September.
  2. 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.

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