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Estonia and Euro Adoption: Small Country Challenges of Joining EMU


  • Zuzana Brixiova


  • Margaret Morgan


  • Andreas Wörgötter



Estonia gave up the exchange rate and monetary policy tools of macroeconomic management when it introduced its currency board in 1992. While the currency board arrangement served the country well during transition in the 1990s, it offers limited flexibility to implement policies that would ease the EU convergence as well as mitigate the global financial and economic crisis. The ongoing financial crisis has made euro adoption more attractive than ever and put it on the top of the country’s policy agenda. However, shocks affecting Estonia are only weakly synchronized with those of the euro area, and the structure of its economy also notably differs from the euro zone. To benefit fully from joining the EMU, Estonia must strengthen other adjustment mechanisms to shocks, including flexibility of the labour market, further improving its environment to do business and a framework, which allows for anti-cyclical fiscal policies. L'Estonie et l'adoption de l'euro : Les problèmes que pose à un petit pays l'adhésion à l'UEM En mettant en place un régime de caisse d’émission en 1992, l’Estonie a renoncé pour sa gestion macroéconomique aux instruments que constituent la politique de taux de change et la politique monétaire. Tout en ayant été très utile pour le pays durant la période de transition des années 1990, le régime de caisse d’émission n’offre qu’une souplesse limitée pour mettre en œuvre les mesures qui faciliteraient la convergence par rapport à l’UE et qui atténueraient aussi la crise financière et économique mondiale. Du fait de la crise financière actuelle, l’adoption de l’euro est plus attrayante que jamais et est une des priorités du pays. Malgré tout, les chocs que subit l’Estonie ne sont que faiblement synchronisés avec ceux que connaît la zone euro et la structure de l’économie estonienne est également assez différente de celle de l’économie de la zone euro. Pour bénéficier pleinement de la participation à l’UEM, l’Estonie devra renforcer d’autres mécanismes d’ajustement aux chocs économiques ; il lui faudra un marché du travail plus flexible, un environnement plus propice aux activités industrielles et commerciales et un cadre qui lui permette de mener des actions budgétaires anticycliques.

Suggested Citation

  • Zuzana Brixiova & Margaret Morgan & Andreas Wörgötter, 2009. "Estonia and Euro Adoption: Small Country Challenges of Joining EMU," OECD Economics Department Working Papers 728, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:728-en

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    Cited by:

    1. Ohr, Renate & Özalbayrak, Mehmet, 2012. "The Euro: A "MUST" for small European states?," Center for European, Governance and Economic Development Research Discussion Papers 131, University of Goettingen, Department of Economics.
    2. Fidrmuc, Jarko & Klein, Caroline & Price, Robert & Wörgötter, Andreas, 2013. "Slovakia: A Catching Up Euro Area Member In and Out of the Crisis," IZA Policy Papers 55, Institute for the Study of Labor (IZA).
    3. Jarko Fidrmuc & Andreas Wörgötter, 2013. "Slovakia: The Consequences of Joining the Euro Aea before the Crisis for a Small Catching-up Economy," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(1), pages 57-63, May.

    More about this item


    business cycle synchronization; EMU; Estonia; Estonie; structural VAR; synchronisation du cycle conjoncturel; UME; VAR structurelle;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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