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Currency Substitution in Anticipation of EU Accession



Countries in Eastern and Central Europe that are likely to join the European Union will eventually also join the European Monetary Union. The process of accession will entail a transition period at the end of which it is certain that the domestic currency will be replaced by the Euro. This paper argues that this programmed demise of the domestic currency may bring about significant spontaneous euroization already during the transition period. If the euro is adopted by the private sector in anticipation of the official changeover, the country incurs a resource cost in the form of lost seignorage. Compared to the initial members of the EMU that could print Euros equal to the outstanding monetary base, a country where euroization takes place before the entry into the EMU will use real resources to obtain the Euros. The paper proposes ways to deal with this difference in treatment.

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  • Hans Genberg, 2002. "Currency Substitution in Anticipation of EU Accession," IHEID Working Papers 08-2002, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heiwp08-2002

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    References listed on IDEAS

    1. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, July.
    2. Slobodan Djajić, 2003. "Assimilation of immigrants: Implications for human capital accumulation of the second generation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(4), pages 831-845, November.
    3. Mahmood Arai & Jonas Karlsson & Michael Lundholm, 2011. "On Fragile Grounds: A Replication Of “Are Muslim Immigrants Different In Terms Of Cultural Integration?”," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 1002-1011, October.
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    Cited by:

    1. Kyriakos C. Neanidis, 2010. "Financial Dollarization and European Union Membership," International Finance, Wiley Blackwell, vol. 13(2), pages 257-282, August.
    2. Rösl, Gerhard, 2006. "Regionalwährungen in Deutschland: Lokale Konkurrenz für den Euro?," Discussion Paper Series 1: Economic Studies 2006,43, Deutsche Bundesbank.


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