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The Exchange Rate Trilemma In Europe: A Case Study

Author

Listed:
  • Mercea (Handro) Patricia Amalia

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

The accession in European Union of ten Central and Eastern European countries, marks the end of the first phase of integration of these economies into Western European economic bloc. In many respects, similarities with developed countries begin to be obvious: opening borders, free capital flows and free people movement, trade development, greater transparency of monetary and fiscal policy, low inflation rates, and macroeconomic stability. The next step - the euro adoption - is both an obligation and a challenge. The debate about „real convergence” and „open economy” sets up the dilemmas for monetary authorities. The result will end into a mix between: real currency appreciation, an increased current account deficit, the accumulation of inflation and international reserve.

Suggested Citation

  • Mercea (Handro) Patricia Amalia, 2019. "The Exchange Rate Trilemma In Europe: A Case Study," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(47), pages 79-86, November.
    • Handle: RePEc:aio:aucsse:v:1:y:2019:i:47:p:79-86
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    References listed on IDEAS

    as
    1. Josef Christl, 2006. "Regional currency arrangements: insights from Europe," International Economics and Economic Policy, Springer, vol. 3(3), pages 209-219, December.
    2. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    3. Josef Christl, 2006. "Regional Currency Arrangements: Insights from Europe," Working Papers 125, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Xavier Gabaix & Matteo Maggiori, 2015. "International Liquidity and Exchange Rate Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(3), pages 1369-1420.
    5. Mr. Akira Ariyoshi & Mr. Andrei A Kirilenko & Ms. Inci Ötker & Mr. Bernard J Laurens & Mr. Jorge I Canales Kriljenko & Mr. Karl F Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 2000/009, International Monetary Fund.
    6. Josef Christl, 2006. "Regional Currency Arrangements: Insights from Europe," Working Papers 42, Bank of Greece.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monetary policy; exchange rate; inflation; currency union; european integration;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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