The Introduction of the Euro in Central and Eastern European Countries - Is it Economically Justifiable?
This paper aims to analyse the correlation of demand and supply shocks between the EMU and CEECs in order to examine whether there is some degree of business cycle coordination between them. The main objective is to investigate the impact on Croatia and compare it with other CEECs. Croatia is of interest in this paper since there is a lack of empirical studies on this topic which include Croatia in the sample. Information on the correlation of demand and supply shocks between the EMU and CEECs is important if a country wants to introduce the euro since the synchronisation of business cycles and policy coordination will have a significant impact on willingness to enter the monetary union (except if the decision is a political one). Since Croatia has started its path towards the EU, it should be expected that it will introduce the euro, since there is no opt-out clause for new members. In order to gather results, supply and demand shocks are extracted from data using Blanchard and Quah (1989) methodoogy and then the correlations of shocks between the EMU and CEECs are calculated as well as the size of shocks and the speed of adjustments. Results indicate that Croatia is, at the moment, far from being ready for the common monetary policy with the EMU; while other CEE countries such as Slovenia and Latvia, which in fact first applied for the introduction of euro, have the closest correlation of their business cycles with those of the EMU.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (**385 1) 23 35 700
Fax: (**385 1) 23 35 165
Web page: http://www.eizg.hr
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fidrmuc, Jarko & Korhonen, Iikka, 2003.
"The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs,"
BOFIT Discussion Papers
6/2003, Bank of Finland, Institute for Economies in Transition.
- Jarko Fidrmuc & Iikka Korhonen, 2004. "The Euro goes East: Implications of the 2000–2002 Economic Slowdown for Synchronisation of Business Cycles between the Euro area and CEECs," Comparative Economic Studies, Palgrave Macmillan, vol. 46(1), pages 45-62, March.
- Iikka Korhonen & Jarko Fidrmuc, 2003. "The euro goes East. Implications of the 2000-2002 economic slowdown for synchronisation of business cycles between the euro area and CEEs," Macroeconomics 0305007, EconWPA.
- Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
- Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbance,"
497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
- Zsolt Darvas & György Szapáry, 2008.
"Business Cycle Synchronization in the Enlarged EU,"
Open Economies Review,
Springer, vol. 19(1), pages 1-19, February.
- Zsolt Darvas & György Szapáry, 2006. "Business Cycle Synchronization in the Enlarged EU," Working Papers 0604, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
- Darvas, Zsolt & Szapáry, György, 2005. "Business Cycle Sychronization in the Enlarged EU," CEPR Discussion Papers 5179, C.E.P.R. Discussion Papers.
- 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.
- Peter Benczur & Attila Ratfai, 2010.
"Economic fluctuations in Central and Eastern Europe: the facts,"
Taylor & Francis Journals, vol. 42(25), pages 3279-3292.
- Benczúr, Péter & Rátfai, Attila, 2005. "Economic Fluctuations in Central and Eastern Europe: The Facts," CEPR Discussion Papers 4846, C.E.P.R. Discussion Papers.
- Péter Benczúr & Attila Rátfai, 2005. "Economic Fluctuations in Central and Eastern Europe - the Facts," MNB Working Papers 2005/02, Magyar Nemzeti Bank (the central bank of Hungary).
- Fidrmuc, Jarko & Korhonen, Iikka, 2004. "A meta-analysis of business cycle correlation between the euro area and CEECs: What do we know – and who cares?," BOFIT Discussion Papers 20/2004, Bank of Finland, Institute for Economies in Transition.
When requesting a correction, please mention this item's handle: RePEc:iez:wpaper:0801. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Banicevic)
If references are entirely missing, you can add them using this form.