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Optimum Currency Areas theory and the Slovak suitability for the euro adoption

Author

Listed:
  • DomeNico Raguseo

    () (Economics Faculty (University Matej Bel))

  • Jan Sebo

    () (Economics Faculty (University Matej Bel))

Abstract

This paper tests the present readiness of Slovakia to join the European Monetary Union (EMU) based on the classical Optimum Currency Area criteria, the degree of trade intensity and business cycle synchronization. The results do not fully confirm the hypothesis that Slovakia already constitutes an optimum monetary union with the rest of the EMU countries mainly the labour mobility is largely ineffective as adjustment mechanism. But, Slovakia is a open economy, its degree of trade integration is the highest among the Central and Eastern European countries and its economic and production structures are quite similar to the intra-EMU average. Moreover, Slovakia's business cycle appears at least as highly synchronized with the EMU''s one as some present, small and peripheral EMU member countries. This would indicate that this country is equally a suitable candidate for the EMU membership and that the Euro adoption should not increase the likelihood of asymmetric shocks.

Suggested Citation

  • DomeNico Raguseo & Jan Sebo, 2008. "Optimum Currency Areas theory and the Slovak suitability for the euro adoption," Economics Bulletin, AccessEcon, vol. 6(40), pages 1-14.
  • Handle: RePEc:ebl:ecbull:eb-08f40025
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    References listed on IDEAS

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    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Eichengreen, Barry, 1990. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 478, C.E.P.R. Discussion Papers.
    3. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    4. Itir Ozer & Ibrahim Ozkan, 2007. "Optimum filtering for optimum currency areas criteria," Economics Bulletin, AccessEcon, vol. 6(44), pages 1-18.
    5. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839, September.
    6. Jules-Armand Tapsoba, 2007. "Bilateral Trade and Business Cycles Synchronization: African Monetary Integration Perspective," Post-Print hal-00171756, HAL.
    7. Tapsoba Jules-Armand, 2007. "Bilateral Trade and Business Cycles Synchronization: African Monetary Integration Perspective," Economics Bulletin, AccessEcon, vol. 6(25), pages 1-15.
    8. repec:ebl:ecbull:v:6:y:2007:i:44:p:1-18 is not listed on IDEAS
    9. Fidrmuc, Jan, 2004. "Migration and regional adjustment to asymmetric shocks in transition economies," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 230-247, June.
    10. Iikka Korhonen, 2003. "Some empirical tests on the integration of economic activity between the euro area and the accession countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(1), pages 177-196, March.
    11. De Grauwe, Paul & Vanhaverbeke, Wim, 1991. "Is Europe an Optimum Currency Area? Evidence from Regional Data," CEPR Discussion Papers 555, C.E.P.R. Discussion Papers.
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    13. repec:ebl:ecbull:v:6:y:2007:i:25:p:1-15 is not listed on IDEAS
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    Cited by:

    1. Peter Sarlin, 2011. "Evaluating a Self-Organizing Map for Clustering and Visualizing Optimum Currency Area Criteria," Economics Bulletin, AccessEcon, vol. 31(2), pages 1483-1495.

    More about this item

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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