Which Exchange-Rate Regime in the EMU Accession Period: An Empirical Analysis
This study is the second part of larger empirical work focused on the timing of European Monetary Union (EMU) accession and on the selection of a pre-accession exchange-rate regime. The tool of our empirical analysis used in both studies is a model simulation that benefits from a consistent macro framework and estimated model equations. Five accession countries were studied. The results demonstrate that it is important to design pre-EMU exchange-rate regimes independently, according to the characteristics of each accession country, such as openness, flexibility, or level of financial wealth. Following the European Exchange-rate Mechanism (ERM II) as a core monetary-policy strategy for the whole of the pre-EMU period may be beneficial only for some accession countries. While Poland would benefit from introducing a fixed-rate regime for the pre-EMU period, for example, the Czech Republic and Slovenia would benefit more from maintaining a floating exchange rate. For Estonia and Hungary, both options have comparable benefits.
Volume (Year): 53 (2003)
Issue (Month): 5-6 (May)
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