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The Timing of EU Expansion and the Real Exchange Rate

  • Paul Cavelaars
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    This paper employs a dynamic Ricardian model to analyse the impact of the timing of EU expansion on the real exchange rate between the accession countries' currencies and the euro. I find that the real exchange rate response to EU accession is smaller in the case of a postponed accession, as postponement gives the regions more time to converge. However, early EU accession would contribute to reducing the real exchange rate response to asymmetric productivity shocks, as increased bilateral trade reduces the size of the non-tradable goods sector, making the real exchange rate less sensitive to productivity shocks.

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    File URL: http://www.dnb.nl/binaries/ms2002-03_tcm46-147315.pdf
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    Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2002-3.

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    Date of creation: May 2002
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    Handle: RePEc:dnb:mebser:2002-3
    Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
    Web page: http://www.dnb.nl/en/

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    1. Gerhard Fink, 2001. "Trade Protection in Five EU Member Candidate Countries by Exchange Rate Adjustment, Customs Tariffs, and Nontariff Measures," Open Economies Review, Springer, vol. 12(1), pages 95-116, January.
    2. Zoltán M. Jakab & Mihály András Kovács, 1999. "Determinants of Real Exchange Rate Fluctuations in Hungary," MNB Working Papers 1999/6, Magyar Nemzeti Bank (the central bank of Hungary).
    3. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1998. "How far is Eastern Europe from Brussels?," MPRA Paper 20059, University Library of Munich, Germany.
    4. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR;CES;MSH, vol. 12(24), pages 125-176, 04.
    5. Fabrizio Coricelli & Boštjan Jazbec, 2004. "Exchange Rate Arrangements in the Accession to the EMU," Comparative Economic Studies, Palgrave Macmillan, vol. 46(1), pages 4-22, March.
    6. Arjan Lejour & Ruud de Mooij & Richard Nahuis, 2001. "EU enlargement: economic implications for countries and industries," CPB Document 11, CPB Netherlands Bureau for Economic Policy Analysis.
    7. International Monetary Fund, 2000. "Exchange Rate Regimes in Selected Advanced Transition Economies; Coping with Transition, Capital Inflows, and EU Accession," IMF Policy Discussion Papers 00/3, International Monetary Fund.
    8. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    9. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
    10. Daviddi, Renzo & Ilzkovitz, Fabienne, 1997. "The Eastern enlargement of the European Union: Major challenges for macro-economic policies and institutions of Central and East European countries," European Economic Review, Elsevier, vol. 41(3-5), pages 671-680, April.
    11. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
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