Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes
AbstractWe present new evidence on de facto euroization in eleven Central, Eastern and Southeastern European countries. Estimates of the extent of foreign currency cash holdings are derived from survey data. Furthermore, we define overall euroization indices, relating both assets and cash holdings. Results confirm that some countries are heavily euroized and that euro cash holdings constitute a sizeable share of local currency in circulation. Euroization levels in other –mainly Central European– countries are low and economically insignificant. Evidently, high euroization bears various significant consequences for economic policies. Therefore, we inquire on the determinants of euroization. We find that euroization is highly correlated with the quality of past economic governance, reflecting past periods of instabilities. In contrast, the more recent –pre-financial crisis– course of economic history had only limited impact. Thus, our results are in line with the view that policy makers in highly euroized countries are severely constrained by past events and that euroization levels might be difficult to revert through stable macroeconomic policies.
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Bibliographic InfoPaper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 159.
Date of creation: 27 Nov 2009
Date of revision:
Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-EEC-2010-01-10 (European Economics)
- NEP-MAC-2010-01-10 (Macroeconomics)
- NEP-MON-2010-01-10 (Monetary Economics)
- NEP-TRA-2010-01-10 (Transition Economics)
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