An Optimal Currency Area Perspective of the EU Enlargement to the CEECs
This paper tries to assess whether it would be optimal for the CEECs to form a monetary union with either Germany or the EU. This cannot be done without discussing first the Maastricht criteria, which are the condition « sine qua non » for a country to be eligible. Yet, they are often independent from more structural criteria (Bayoumi and Eichengreen (1996b)). Hence, this paper argues that although the CEECs do not satisfy -yet- the Maastricht criteria, their economic cycle is close enough to that of the EU and Germany for a monetary union to bring them great benefits. Indeed, using a methodology derived by L. Reichlin and M. Forni (1997) and C. Fuss (1997), it can be shown that (i) the percentage of CEECs business cycle fluctuations explained by a German shock is very high,; (ii) furthermore, the impulse responses are positively correlated. These suggest that the CEECs would not suffer from a common monetary policy .
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- Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
- Bayoumi, Tamim & Eichengreen, Barry, 1992.
"Is There a Conflict Between EC Enlargement and European Monetary Unification?,"
CEPR Discussion Papers
646, C.E.P.R. Discussion Papers.
- Tamim Bayoumi & Barry Eichengreen, 1992. "Is There a Conflict Between EC Enlargement and European Monetary Unification?," NBER Working Papers 3950, National Bureau of Economic Research, Inc.
- Tamim Bayoumi and Barry Eichengreen., 1992. "Is There a Conflict Between EC Enlargement and European Monetary Unification?," Economics Working Papers 92-188, University of California at Berkeley.
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