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Lending booms in the new EU Member States: will euro adoption matter?

  • Brzoza-Brzezina, Michal

The paper analyses the potential for lending booms in the three biggest new EU Member States (the Czech Republic, Hungary and Poland) during the process of euro adoption. Experiences of some old members (Greece, Ireland and Portugal) and the econometric evidence speak in favour of strong loan increases in Hungary and Poland even though their magnitude may be smaller than in the case of those recently recorded in Ireland and Portugal. Due to estimation problems, the situation in the Czech Republic was more difficult to foresee, but given almost complete interest rate convergence with the euro area only modest increases in lending should be expected there. In conclusion, it may be stated that, given the currently available information, no substantial risk to the banking sectors of the new Member States should be expected. JEL Classification: E51, E58, G21

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Paper provided by European Central Bank in its series Working Paper Series with number 0543.

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Date of creation: Nov 2005
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Handle: RePEc:ecb:ecbwps:20050543
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  1. Jakub Borowski & Michal Brzoza-Brzezina, 2004. "Designing Poland's Macroeconomic Strategy on the Way to the Euro Area," EUI-RSCAS Working Papers 10, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
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  14. Calza, Alessandro & Manrique, Marta & Sousa, João, 2003. "Aggregate loans to the euro area private sector," Working Paper Series 0202, European Central Bank.
  15. Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," CESifo Working Paper Series 755, CESifo Group Munich.
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