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How has the financial crisis affected the Eurozone Accession Outlook in Central and Eastern Europe?

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  • John Lewis

Abstract

This paper analyses how the financial crisis has affected task of meeting the Maastricht Criteria for the eight Central and Eastern European Countries which have yet to join the euro. It identifies the channels by which the crisis has fed through to deficits, debt, interest rates and inflation and seeks to provide numerical estimates of these factors. Deficits have worsened, but for most countries the problem is still primarily structural rather than cyclical. Debts have risen, but only in the cases of Latvia and Poland has the crisis changed the outlook for meeting the criterion. Inflation has fallen, particularly in the Baltic states on account of large output gap declines. The depth of the recession is likely to depress inflation rates for several years. Lastly, the interest rate criterion is more challenging because of the rise in spreads since the crisis.

Suggested Citation

  • John Lewis, 2010. "How has the financial crisis affected the Eurozone Accession Outlook in Central and Eastern Europe?," DNB Working Papers 253, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:253
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    File URL: https://www.dnb.nl/binaries/Working%20Paper%20253_tcm46-237427.pdf
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    References listed on IDEAS

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    1. Jan Fil??cek & Roman Horv??th & Michal Skorepa, 2006. "Monetary Policy before Euro Adoption: Challenges for EU New Members," William Davidson Institute Working Papers Series wp853, William Davidson Institute at the University of Michigan.
    2. Dobrinsky, Rumen, 2006. "Catch-up inflation and nominal convergence: The balancing act for new EU entrants," Economic Systems, Elsevier, vol. 30(4), pages 424-442, December.
    3. Lewis, John, 2009. "Hitting and hoping?: Meeting the exchange rate and inflation criteria during a period of nominal convergence," European Journal of Political Economy, Elsevier, vol. 25(4), pages 508-524, December.
    4. Juraj Antal & Jan Filáček & Jan Frait & Roman Horvath & Viktor Kotlán & Michal Skořepa, 2009. "Monetary Policy Strategies before Euro Adoption: The Art of Chasing Many Rabbits," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(2), pages 176-198, July.
    5. Alexander Mihailov & Fabio Rumler & Johann Scharler, 2011. "Inflation Dynamics in the New EU Member States: How Relevant Are External Factors?," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 65-76, February.
    6. Zsolt Darvas & Gyorgy Szapary, 2008. "Euro Area Enlargement and Euro Adoption Strategies," IEHAS Discussion Papers 0824, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    7. Marek Dabrowski, 2007. "EMU enlargement: A progress report," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(1), pages 39-44, April.
    8. Ebner, André, 2009. "An empirical analysis on the determinants of CEE government bond spreads," Emerging Markets Review, Elsevier, vol. 10(2), pages 97-121, June.
    9. Paul Grauwe & Gunther Schnabl, 2005. "Nominal Versus Real Convergence - EMU Entry Scenarios for the New Member States," Kyklos, Wiley Blackwell, vol. 58(4), pages 537-555, November.
    10. John Lewis & Karsten Staehr, 2010. "The Maastricht Inflation Criterion: What is the Effect of European Union Enlargement?," Journal of Common Market Studies, Wiley Blackwell, vol. 48, pages 687-708, June.
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    Cited by:

    1. Mező, Júlia & Bagi, Ágnes, 2012. "Crisis management in the Baltic States," MPRA Paper 40366, University Library of Munich, Germany.
    2. Ayala, Astrid & Blazsek, Szabolcs, 2013. "Structural breaks in public finances in Central and Eastern European countries," Economic Systems, Elsevier, vol. 37(1), pages 45-60.

    More about this item

    Keywords

    New Member States; Convergence Criteria; Euro Adoption; Financial Crisis;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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