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An Optimal Currency Area Perspective of the EU Enlargement to the CEECs

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  • Boone, Laurence
  • Maurel, Mathilde

Abstract

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 .

Suggested Citation

  • Boone, Laurence & Maurel, Mathilde, 1999. "An Optimal Currency Area Perspective of the EU Enlargement to the CEECs," CEPR Discussion Papers 2119, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2119
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    References listed on IDEAS

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    1. Eichengreen, Barry & Uzan, Marc, 1992. "The Marshall Plan: Economic Effects and Implications for Eastern Europe and the Soviet Union," Department of Economics, Working Paper Series qt6kr8157r, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. 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.
    3. Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    eastern enlargement; Economics of Transition; Optimal Currency Area;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F3 - International Economics - - International Finance
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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